Commodities Close To A Major Bottom

From ShortSideofLong

Commodity prices are approaching a major support level

CRB Index vs 200 MASource: Short Side of Long

Commodities are now on track for their fifth annual decline in the row. This is an extremely rare occurrence for any asset class. In the case of commodities, prices have now declined below March 2009 bottom and have recently started to test the level of 185 on the CRB Index. This price dates all the way back to 2001, when the China driven commodity bull market began. Such a persistent decline has resulted in production and supply cuts, which will eventually saw the seeds for a strong rebound.

Sentiment on commodities is approaching rock bottom levels

Commodity SentimentSource: SentimenTrader

Sentiment in the raw materials sector remains at ridiculously low levels, relative to the historical mean. The chart above, thanks to SentimenTrader, shows that the percentage of bulls is now at the lowest level in over a decade and half. Contrarians should definitely pay attention to the prices in coming weeks and months ahead, as a major bottom could be forming.

Speaking of bottoming process, there is a high probability that the oversold Energy sector has successfully retested its crash low from earlier in the year. I would expect the bottoming pattern to continue for awhile still, as we build a complex base along the lines of a triple bottom perhaps. If the current price level persists for longer, production will be dramatically reduced ensuring a big bull market around the corner.

Crude Oil continues to build a bottoming base post 2014 crash

Crude Oil ReturnsSource: Short Side of Long