For a very long time, commodities were in a protracted bear market. Each time prices went up, they hit the top of a wide channel and were pushed down… until 2004 when the CRB broke above the channel and went on a wild ride.
More and more the bull market appeared unsustainable as prices accelerated. Comparing the bear market channel with the bull market that ensued, it is easy to see the contrast. While the bear meandered lazily with the rhythm of an endurance runner, the bull market shot ahead with a one track mind.
But now, with the price of crude oil deflating fast, the CRB Commodities Index finds itself again in a clear bear market:
To be precise, the CRB Index is now down 24% from the top in July 2008. If this was an equity market, it would have qualified the standard +20% definition of a bear market.
If this is truly a change in the long term trend, it would not only mean a shot in the arm for equities but also the world economy.
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