Nostalgia for Summer 2008 in Commodities

Veteran traders and investors know that market price action repeats itself time and time again. An examination of longer-term historical price charts proves this.

A gander at longer-term charts for several commodity markets -- including crude oil, grains, metals and international foods -- shows their present price postures resemble those of last year at this time: solid price uptrends in place. This is clearly seen by an examination of the weekly bar chart for the Continuous Commodity Index (CCI). The CCI is a basket of 19 raw commodity futures prices rolled into one composite price index.

Continuous Commodity Index Weekly Chart FutureSource.com and TradingEducation.com

Also similar to last year at this time, commodity futures markets are being led higher by crude oil, which is being led higher by a weakening U.S. dollar. Indeed, the first half of 2008 saw a trading "vortex" created, as a slumping greenback funneled more and more speculative money into crude oil and other commodity markets. July 2008 saw crude oil prices top out just shy of $150 a barrel while gold, grains and other commodity futures markets established all-time record highs.

If history once again repeats itself, the bull run in commodity futures markets has a few weeks left before traders and investors should start to look for signs of a change in price trends. The last half of 2008 saw commodity futures markets take a precipitous tumble, with many individual markets losing half or more of their value from their summer 2008 peaks.

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At time of publication, Wyckoff had no positions in the stocks mentioned, although positions may change at any time.

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.