Commodities Signal 12% Rally by End of Year: Technical Analysis

By Millie Munshi
July 24 (Bloomberg) -- Prices for commodities including oil and copper may rally another 12 percent this year, based on a technical analysis of moving averages by Logic Advisors.The Reuters/Jefferies CRB Index of 19 raw materials climbed above its 50-day moving average today, a “bullish” signal for prices, said William O’Neill, a Logic Advisors partner in Upper Saddle River, New Jersey. As the index moves higher than the 50- day average, that momentum will attract more investors to commodities, helping to spur further price gains, he said.The CRB Index has jumped 26 percent from this year’s low on Feb. 24, as indications emerged that the worst of the global recession has passed and China’s demand for raw materials rose. Oil has surged 51 percent this year, and copper is up 79 percent.

“Commodities are in a bullish mode,” O’Neill said. “We’re seeing more money flow into commodities, particularly industrial commodities, and we’re seeing the gradual erosion of the dollar. These will continue to be driving forces for these prices, along with the evidence that the global economy is bottoming. We’ll see commodities rally 10 to 12 percent by year- end.”Earlier this year, the CRB pushed past the 50-day moving average on March 17 and rose 6 percent by March 23 before retracing the gain. The index jumped over the 50-day average again on March 31 and surged 21 percent by June 11.The CRB Index rose 1.8 percent today, the biggest gain in six weeks, to 251.27 in New York. The gauge’s 50-day moving average stood at 248.50.