CRB Index Shows Commodities Still Have A Long Way To Go

If I gave you a crop insurance presentation this spring, the following chart may look familiar.  It showed that back in February and March, commodity values were at their lowest since 1973.  Since then, prices have rallied significantly off of their lows.  Prices have blown through their first level of resistance and are very close to their second.

265 would be a major area of resistance, showing numerous touches through the years.  Just below that would be the 200 week moving average around 255.  This range is what I would call average.

That said, commodity prices are nearing a level of significant resistance near 200.  I can see prices reaching this level over the next couple of weeks, either by the FOMC Meeting on June 14-15, or on the June 23 Brexit vote.  It is amazing how these price levels always have major turning points around these dates.  You can see from the chart below that it is entirely possible that commodities could reach the 203 level which in turn could form the neck line of a major head and shoulders bottom.  The measuring distance for a rally out of this formation happens to be at the 255-260 level which is where I consider the average range for the CRB.

I want you to think about selling some 2017 grain.  The first sale would be some soybeans before this parabola breaks today or tomorrow.  November 2017 soybeans are presently trading at $10.05.  I don't think it would be a bad idea to sell 10% at this level today or tomorrow morning.   This would be but a nibble off the top of a very strong rally.

Corn and wheat both have more room to run than do the soybeans.  The optimism index on corn is getting close to being considered excessively optimistic.  If 2017 corn can push to $4.30, I will recommend a 10% sale.