Market Insights: Commodity prices sitting at major long-term support level

Commodity prices sitting at major long-term support level

As you can see from the long-term chart of the widely followed Thomson Reuters/CoreCommodity CRB Index below, commodity prices have fallen hard since last summer and are now sitting right at a 40-year support level (click for definition).  The index is currently comprised of nineteen different commodities, of which energy typically represents 35-40%.  

The low intraday point since 1977 had been 182.77 going all the way back to February 1999.  So far this week, it has dipped down to as low as 182.56, although it's closing low is 183.60.  It is indeed rare to see a distinct support shelf for such a long period of time. March of 1975 did see an intraday low of 1975, so let's call this a price support zone of 175-185.  We will give the current situation some time to see if it can build and move off this base.  We would ideally like to see this hold above 182 but we could give it some leeway down to the 175 level.  

WTI Crude oil prices are also currently just barely hanging on above the important US$40 level.  At the end of the day, if we were to see this 40-year support zone significantly broken along with oil prices moving below US$40, we could very well see even more difficult times ahead for the energy sector.

 

    Source:  The Short Side of Long, StockCharts.com