Commodity-wide Bear Market Spurred by Slower Global Growth Prospects
???? Fundamentals
The historic sell-off in Gold prices the past few sessions has sent many traders away from commodities in general, triggering what may be the start of a commodity-wide bearish trend, at least for the near-term.
It seems that no commodity complex has been spared long-liquidation selling, with even relatively uncorrelated markets like livestock and the” softs” showing weakness. With the advent of “commodities” as an asset class the past several years, the market correlations have trended closer to 1 during times of heightened volatility.
Outside the metals sector, energy markets were also hard hit at concerns that the Chinese economy is slowing more than expected. Slow growth for the world’s largest consumer of commodities is becoming even more pronounced given the recessionary environment in Europe.
Though U.S. and Japanese Central Banks are still in stimulus mode, it appears that the liquidity being provided is not moving fast enough into the “real” economy by means of increased spending by consumers and expanding businesses, but is instead finding its way into “soft” assets like equities and bonds that may do little to spark demand for “hard” assets and commodities.
???? Technical Notes
Looking at the daily continuation chart for the GSCI Index, notice that a look at the big picture, commodity prices are in the middle of a consolidation pattern that begins at the end of 2010.
Prices are currently below both the 20 and 200-day moving averages, but are still over 75 points above critical lows made back in June of 2012. The 14-day RSI is approaching oversold an reading, currently at 32.30. Support is seen near 602.00, with resistance seen at the 200-day moving average, currently near the 649.50 price level.
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