Commodities on the rise, but can they pull back?May 23, 2024

Commodities have been in a bull run since 2020, within an uptrend that can resume after the pullback observed in 2022. Analyzing the CRB Commodity Index, I believe that the pullback from that recent 2022 high isn’t over yet. There’s potential for a C wave that could retrace to 38.2% of the 2020 bull run. This may suggests that inflation might cool down, but much depends on the Federal Reserve’s rate decisions. Premature rate cuts could spur demand and drive prices higher, complicating the inflation scenario.

Commodities on the rise, but can they pull back? Thomson Reuters CRB Monthly Chart
Thomson Reuters CRB Monthly Chart

From an Elliott Wave and sentiment perspective, a near-term contrarian response seems plausible, especially given the prevailing analyst expectations for immediate price increases across commodities like copper. However, historical cycles on copper indicate a potential downturn following strong rallies to new all-time highs, suggesting that the current cycle for copper may be nearing its end. Silver is also moving into some strong resistance at 33-35 for 2024.

Commodities on the rise, but can they pull back? Copper Monthly Chart
Copper Monthly Chart

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