Look for Commodity Weakness

Early shorter-term technical and chart clues in many commodity futures markets have begun to suggest major price bottoms are in place. Fledgling price uptrends are under way on the daily price charts in many commodity futures markets, including cattle, soybeans, cotton, coffee, orange juice and copper.

However, as seen on the monthly chart for the Continuous Commodity Index, a big and bearish pennant pattern looms. And on the weekly CCI chart, a bearish symmetrical triangle pattern is still in play.

Continuous Commodity Index Chart -- Monthly FutureSource.com and TradingEducation.com

The CCI is a basket of 19 major raw commodity futures prices rolled into one composite index. It's an excellent gauge of the general trend in commodity prices and commodity price inflation. The monthly and weekly CCI charts suggest the commodity market bulls still have more work to do to turn the longer-term technical picture in the sector away from a bearish posture.

Pushing the CCI above longer-term technical resistance at 400 would negate the bearish longer-term chart patterns and would also strongly suggest a major low is in place in the CCI.

Importantly, from a shorter-term technical perspective, I noticed a fairly consistent pattern has developed the daily charts for several commodity markets over the past several months: Prices have tended to trend for about five or six weeks and then reverse the trend. See on the daily CCI chart how this pattern also shows up for commodity prices, in general:

CCI Chart -- Daily FutureSource.com and TradingEducation.com

To extrapolate further, if the aforementioned shorter-term commodity price cycle continues to play out in the coming few months, many of the commodity prices that have been trending higher the past several weeks are now due to reverse their uptrends and begin downtrends into late May and early June. Indeed, some commodity markets that had been in recent price uptrends on the daily charts are now seeing price action turn sideways and choppy. These markets include crude oil, corn and sugar.

Interestingly, seasonality price charts for commodity markets suggest that several of those markets also have seasonal lows due during the May-June timeframe. Seasonality charts take into account the seasonal nature of ag commodities, including planting and harvest patterns and weather.

Also, look for the commodity futures markets to continue to generally follow the direction of the U.S. stock indices. Any sustained strength in the U.S. equities market would be an underlying bullish development for commodities. Conversely, any sustained downtrend in U.S. stock index prices would limit buying interest in the commodity markets due to the specter of deflationary price pressures amid ongoing world economic malaise.

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Know what you own: Equities and ETFs in the commodity space include U.S. Oil (USO - commentary - Cramer's Take), PowerShares DB Agriculture (DBA - commentary - Cramer's Take), Market Vectors Global Agribusiness (MOO - commentary - Cramer's Take), PowerShares DB Energy (DBE - commentary - Cramer's Take), Gold Trust (GLD - commentary - Cramer's Take), PowerShares DB Base Metals (DBB - commentary - Cramer's Take) and Silver Trust (SLV - commentary - Cramer's Take).

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Jim Wyckoff is a senior market analyst for TradingEducation.com a free educational Web site. In addition, Wyckoff writes a blog offering current market commentaries every morning on TraderBlogs.com. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Wyckoff appreciates your feedback; click here to send him an email.