Here's the thing: On January 31, 2010, the Reuters/Jefferies CRB Index of Commodities pulled a lemming: prices dove head first over a cliff to land at their lowest level in four months.
According to the mainstream experts, one main factor spooked the CRB into going south; to wit:
"Commodities retreat as concerns over the outlook for technology companies' earnings overshadowed Commerce Department data showing the US economy grew at a 5.7% annual pace last quarter, the fastest pace in six years." (Bloomberg)
Funny, because one hour BEFORE this particular news item broke, this other headline hit the internet: "US Stock Futures Higher After GDP Data" (Wall Street Journal)
And then again, one day AFTER, this report went viral: "Stocks Climb On Strong Economic Reports... Investors were already becoming more optimistic thanks to news on Friday that the economy grew at the fastest pace in six years." (Business Week)
So, my question is: How does one single fundamental produce three different reactions from the markets in as many days? Answer: It doesn't.
Here are the facts: the most recent downtrend in the CRB Index didn't get started with "technology companies' earnings" or with "strong economic reports." It got started on January 11. And, in the January 8 Daily Futures Junctures Weekly Wrap-up, long-time editor and EWI's chief commodity analyst Jeffrey Kennedy presented the following close-up of the CRB that showed prices zeroing in on an important peak:
Here, Jeffrey identified a classic double zigzag pattern underway in the CRB index. A single zigzag is a simple, three wave pattern labeled A-B-C, in which the top of wave B is noticeably lower than the start of wave A and wave C travels well beyond the end of wave A. Occasionally, zigzags will occur twice (or at most three times) in succession, producing what is called a double (or triple) zigzag.
Once you recognize a zigzag in action, you can then anticipate when the pattern may end using Elliott's Guideline of Equality: Wave C often travels the same distance as wave A; or, that the first A-B-C sequence travels the same distance as the second one. In the January 8 Weekly Wrap-up, Jeffrey calculated both targets at 501.70 and 528.50. (See bottom of chart)
For its near-term script, the CRB Index peaked at 504.76 before turning down in a powerful selloff to the four-month lows we see today. And, in the just-published February 1 Daily Futures Junctures, our analysts revisit the CRB to determine whether the end of the downtrend is here.