Our last review of the commodity markets was in June, using the data from the close on June 12 (click here to review). Quite a bit has changed since then for many of the markets, but there have been some constants as our negative technical view of the dollar index has persisted.

Figure 1 - Click to Enlarge

In June, we noted that the uptrend in the weekly RSI on the dollar index, line d, had been broken, which favored a further decline after a technical rebound. The bounce took the dollar index from 78.37 to 81.79 and failed to even reach the 38.2% resistance level at 82.80. The dollar has since drifted lower and despite the high degree of bearish sentiment, the weekly studies show no signs yet of bottoming. The RSI is still well below its declining WMA and has not yet formed any positive divergences. This suggests that the band of next support at 71-74.50 will be tested. The first sign of a bottom would require an impulsive two- to three-week rally that would take the RSI back above its WMA, and then it would take more time for the WMA to flatten out and turn higher. For now, rallies are likely to fail at resistance in the 78-79 area.

Figure 2 - Click to Enlarge

By looking at the price performance of gold and crude oil, one would expect the chart of the CRB Index to look much different that it does. Despite some weak bottoming signals at the late-2007 lows, the rally has not been that impressive. The weekly chart shows that the 38.2% resistance at 433 has not been convincingly overcome with the 50% level at 470. The weekly RSI gave strong signals of a top in the summer of 2008 as it formed a significant negative divergence at the July 2007 highs, point 2. The downtrend in the RSI, line a, was overcome in March (line 3), which confirmed the slight positive divergence in the RSI, line b. So far, the RSI is holding above its WMA and a break of the uptrend would weaken the intermediate-term uptrend.

Figure 3 - Click to Enlarge

Sugar has been of the strongest commodity markets as it has risen from the April lows of 12.13 to a high of 25.37. The weekly triangle formation, lines b and c, was completed in April and the OBV confirmed the breakout as it moved above major resistance at line 3. In June, we noted that rally appeared to have stalled in the 16 area, but expected a pullback to be well supported. As is often the case, the OBV just briefly dropped below its rising WMA during this period of consolidation. After moving sideways for four weeks, sugar once again accelerated to the upside. The OBV continues to lead prices higher and is well above its uptrend, line 4. Using the rally from a to b and projecting up from the low at point c, the 261.8% target is now at 27.50. The all-time high from 1980 is at 43.

NEXT: Current Technical Picture for Soybeans, Wheat, Coffee, and More