The following commentary was initially published on May 4, 2011.
In late April, we noted that a potentially violent overbought correction in commodities was becoming more likely. Today, the Continuous Commodity Index (CCI) closed well below uptrend support on the daily chart, indicating that the anticipated correction may be underway.
The negative divergence between technical indicators and price behavior remains in place, resulting in a bearish condition overall that supports a continuation of the developing decline. Long-term uptrend support on the weekly chart is currently at 685, so a close at current levels or lower on Friday would constitute a meaningful breakdown.
The CCI has been rising at an unsustainable rate for many months, so a confirmed breakdown on the weekly chart would signal the likely start of a sharp retracement.
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