CRB Index - Long term view

Yesterday I wrote about the CCI-Index and some of the most important commodities (see the link below)

http://theelliottwavesufer.blogspot.com/2011/05/commodities-cci-index-tested-major.html

I thought it could be interesting looking at the CRB-Index too. The above chart shows the CBR-Index since 1962 and we can see two nice looking 5 wave advances. The first ending at 337.60 in November 1980, while the second ended at 473.97 in July 2008 with an overthrow of the rising channel. The important question is whether we have seen a Super Cycle top at 473.97 or it "just" was the top of Cycle wave 3. I'm inclined to count it as a Cycle wave 3, which means we are now in a Cycle wave 4. As wave Cycle wave 3 was a double zig-zag we should expect either a flat or a triangle as wave 4. The first two waves is most likely done and as wave B "only" corrected 61.8% of wave A, then a triangle is the most likely count for Cycle wave 4.
If this is the case we should look for wave C of 4 down towards the 264.75 area.

If we zoom in on the last five wave rally and the following correction it's very interesting to observe, that we have fractal formations as the ending of the impulse and wave B (see the chart below)

CRB Index - Top in place?

We might well have seen an important top in the CRB index. We had a very clear five wave decline in 2008 from 473.97 to 200.16 followed by a zig-zag correction, which has almost perfectly hit the 61.8% retracement mark for wave A.

If the top is in place we need to see a decline through 335.10 soon, which will confirm a decline to at least the 321 area.

Risk is, that support at 335.10 protects the downside, which means we need just one more new high closer to or just above the 369 before the top is finanlly in place.

If we have seen an important top in the CRB Index, then we problably have seen or are very close to see important tops in the commodity currencies as well.

Shanghai Composit - Breaking down alongside commodities

The Shanghai Composit is breaking down and today broke below is September 2009 bottom. According to the Dow theory the break below the September bottom was a bearish signal, as we now have lower tops and bottoms.

From and Elliott Wave Principle view my preferred count is that we a in wave iii down from the August 2009 top and should have no trouble breaking below support at 2,525.50. A break below that level will eliminate the possible A-B-C count from the August 2009 top.

In my view the current decline does look very impulsive and not as the end point of a correction.

China has been buying commodities as there was no tomorrow stockpiling especially base-metals like copper, lead, nickle etc., but seem to come to an end too.

Looking at the CRB chart below, there was a very nice symmetry between wave [A] and [B] where wave [A] took 34 week whereas wave [B] took 47 weeks (34 x 1.382). The break below 256.80 marked the the real onset of wave iii down.

Taking a closer look at the final part of the correction in the CRB-Index a very nice Diamond top has formed calling for a decline to at least 242 area.

Finally looking at copper we can see it breaking down too, but a break below 285.40 would mark the ending to the [B] wave rise from 124.75 calling for a decline below 124.75 in wave [C] As can be seen in the chart below wave [B] stopped at exactly the 78.2 % retracement point of wave [A].

The above charts all indicates one thing, that China is headed for an economic slowdown. It has never been my view that China was able to lead the global economy, but China did help along side the US, UK, Japan and Europe to make the [B] wave or wave 2 rally bigger than most of us expected, but the odds favor that it's all over.

CRB-Index - Perfect time for a breakdown

The CRB-Index is breaking down after a prolonged time period of correction. Ideally the time used up by the correction would take between 50% to 61,8% of the time used by the wave that are being correctede. Correction can become prolonged as we have just seen here in the CRB-Index in this case the correction has taken 1.382 times the duration that wave [A] took.

Wave [A] took 34 weeks (A Fibonacci number itself) and wave [B] took 34 x 1.382 = 47 weeks.

Looking at the internal relationship of wave [B]. If we regard the correction as an A-B-C correction, wave A took 16 weeks (a little less than half the time wave [A] took). Wave A+B took 21 weeks, which is a Fibonacci number and finally wave C took 26weeks, which is close to 1.618 times wave A (16 x 1.618 = 25.89).

You don't get it much better than that.

As can be seen, we have clearly broken down below the support-line from early March spelling trouble for the commodity currencies - AUD, BRL, CAD, NZD and ZAR (BRL isn't freely traded, so we can count that one out, but for the rest we can expect some very steep falls.