A look at the long-term (monthly) chart shows gold undergoing a correction before encountering support at $1650/ounce. Recovery above $1700 would re-test resistance at $1800, the higher trough suggesting resumption of the primary up-trend. Breakout above $1800 would confirm. A 63-day Twiggs Momentum trough close to the zero line would strengthen the signal, while reversal below zero would suggest that the 5-year bull-trend is over and a test of primary support at $1500 likely.
Commodity Prices are a good predictor of stock market performance. Dow Jones-UBS Commodity Index retreated from 150 but support around 140 would indicate another attempt at a breakout — and recovery above 144 would strengthen the signal. Rising Twiggs Momentum suggests a primary up-trend but only breakout above 152 would confirm.
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.
Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.
How does this commodity index predict stock market performance?
Rising demand for commodities signals economic recovery.
Re. Twiggs comment:- Respectfully, economic recovery and rising stock market not always synonymous. Also, over last 12 months = almost no correlation. Similarly, with stock market near highs, why is commodity index so low = further indication of very unreliable indicator of stock market performance?
Strong correlation between s&P 500 and CRB Commodities Index since early 2000s. Divergence over last year — is this a warning? Or proof that correlation is over?
Twiggs, your initial comment = “Rising demand for commodities signals economic recovery”. So, does one not need therefore to put up the charts of ‘GDP economic recovery” vs ” stock market performance” (ie. not the ones displayed). Regards.
I don’t have a chart available for GDP (real or nominal) so used the S&P 500 as a surrogate.
I believe the bull market in Gold is 12 years old , not 5 as stated!
It depends on how you want to treat March to December 2008.