Is the great run-up in commodity prices here to stay?
Easy enough question, yet the mainstream experts are more divided on the issue than politicians on health care reform. The gloves are off, as both sides fight to make their case in the media circuit. Here, these news items split the line down the middle:
- "As demand [in emerging economies] snaps back -- and we're seeing it now -- then the commodity boom roars on." (Wall Street Journal)
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- "Best Of The Commodity Bull Market Is Over" (AP)
And:
- "Halcyon period for [commodity] producers. There is no sign that the commodity Bull Run will end soon." (Reuters)
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- "The commodity bull market is on shaky ground. When you build a base on printed money and central bank currency pegs, we know it creates bubbles that can easily burst." (Inside Futures)
We could be at this for days. Fortunately, there's an alternative: the March 13 Daily Futures Junctures. In that issue, Elliott Wave International's chief commodity analyst and long-time Futures Junctures Service editor Jeffrey Kennedy examines the price chart of a major exchange traded fund to see whether its dominant Elliott wave pattern supports his overall outlook for commodities.
Here is a partially reprinted version of one of Jeffrey's three charts of the Power Shares Deutsche Bank Agricultural Fund (ticker symbol: DBA), which is composed of futures contracts on agricultural commodities: corn, wheat, soybeans, and sugar.
For those of you new to the school of Elliott wave analysis, the pattern above is a contracting triangle.
A contracting triangle, or "horizontal" as it's known for its sideways direction, contains five overlapping waves labeled A-B-C-D-E. In a regular variety, the triangle takes place entirely within the area of preceding price action. In a running triangle, wave B exceeds the start of wave A to set a new extreme. All triangles occur in the position prior to the final actionary wave in the pattern of one larger degree, i.e. wave 4 of an impulse, or wave B of an A-B-C.
And finally, once a triangle is complete, it is often followed by a dramatic "thrust" in one direction.
End the debate today. Get the complete publication via a risk-free Futures Junctures Service subscription.