Commodities: Poised To Bounce
Last week on Business Monitor Online I suggested that commodities looked poised for further gains as the US dollar weakened slightly and equity markets pushed higher. Two charts in particular point to additional upside for commodities. The first is the Baltic Dry Index, which has pushed above resistance in recent trading. Indeed, the Index seems to be resuming the uptrend in play since December 2008, which is a bullish sign.
The second bullish chart is that of net speculative positions, which shows an increase in net longs last week. Net speculative positions had started to come off in late January/early February and almost halved from a level of about 1.2mn long positions to 0.6mn during the selloff in markets. However, investor appetite seems to be returning to markets as net speculative positions climbed to 0.78mn last week.
I see potential for further gains for energy and metals in particular (softs look somewhat weak). This will lift the general commodities complex as illustrated by the CRB Index. Indeed, a break above resistance around the 280 level would be a bullish sign.
