With the US Dollar coming back to life, commodities have pulled back. And that pullback now has the “equal weight” complex in trouble.
Below is a chart of the Thomson Reuters Equal Weight Commodity Index. The green shaded area represents a 20-year rising channel (point 1). Within that channel, however, commodities have formed a multi-year downtrend (point 2 – marked in red).
Using the all-time high and the early 2016 low, we can identify key Fibonacci levels. One level is the 23.6% Fib, which proved to be stiff resistance (point 3), marking a bearish reversal as well.
Currently, the Commodity Index is attempting to break 20-year channel support (point 4).
Investors should watch for follow-through selling on the Index (as confirmation).
Commodities just may be sending an important global macro message to investors!
Commodities Index “Long-Term” Monthly Bar Chart
The Invesco DB Com Indx Trckng FundETF (DBC) was unchanged in premarket trading Thursday. Year-to-date, DBC has declined 0.00%, versus a 6.01% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of Kimble Charting Solutions.