Bigger Picture Charting the Commodity Collapse with the CRB Index

Feb 26, 2016: 12:01 PM CST

If you don’t actively follow commodities, you may have missed the severity of the ongoing “commodity creep” or “commodity collapse” which has taken the broader CRB Index to a startling location.

Let’s begin our perspective with the Monthly Chart:

The Thompson Reuters/Jefferies Commodity Research Board CRB Index is a measure of 19 commodities, though Oil/Petroleum make up most (33%) of the Index.

The index can be a quick way to track inflation (or the lack thereof) at a glance.

First, the index collapsed during the global financial crisis of 2008 from 475 to 200 (along with Oil’s collapse) and then recovered just shy of the 400 index level in 2011.

From there, a new downtrend developed and though the index supported at the 275 level, late 2014 saw a breakdown and sustained collapse taking us to the current new low near 160.

To put that in context, the index suggests economic conditions and inflation (disinflation) is lower/worse than what occurred during the worst part of the 2008 global crisis.

A chart like this makes it difficult to understand how the US Federal Reserve can raise rates with the broader commodity index at the current lows.

Nevertheless, here is the Weekly Chart which highlights the 2014 into 2016 crash:

Despite the new lows, we wonder whether the broader commodity index will bottom and reverse “up away from” the 160 level (on positive momentum divergences) or else continue downtrending and escalating the ‘creeping crash.’

As we go through 2016, continue watching this index and the 155/160 level amid a possible – probable – rally up toward the 170 level in the near future (like the prior blue trendlines highlight).

If commodities can’t recover or bounce from here, we’ll be surprised but expect additional “creeping crash lows” to continue.

Corey

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