Eoin Treacy's view I corresponded with the Bloomberg help desk in April in an attempt to have the CRB Continuous Commodity Index updated. They told me that it was no longer possible because related futures trading on NYBOT were no longer trading. However, after a hiatus of a few weeks, the Index is updating once more, probably because of complaints such as ours. This is a welcome development since it has such a lengthy back history and offers such a good benchmark for the commodity markets. (Also see Comment of the Day on April 24th).

The Index encountered resistance in the region of 600 from September and has held a progression of lower rally highs since. It has lost momentum somewhat over the last month but a sustained move above 550 would be required to confirm a return to medium-term demand dominance. Let's take a close look at the constituents:

Within the energy sector, Brent Crude fell back from $120 to test the $100 area by April and continues to pause in that region. A sustained move below $97.50 would be required to question current scope for continued higher to lateral ranging. Heating Oil has a relatively similar pattern. WTI Crude Oil firmed above $90 and looks likely to range with an upward bias. Natural Gas broke successfully above the psychological $4 area in March and has been ranging mostly above it in a steady reversion towards the mean. A sustained move below the 200-day MA would be required to question medium-term potential for additional higher to lateral ranging.

Within the metals sector, gold continues to steady above the April lows but will need to sustain a move above $1500 to begin to question the medium-term progression of lower rally highs. Silver continues to firm from $22 but needs to sustain a move above $24 to question its progression of lower rally highs. Platinum continues to rebound from the lower side of its more than 18-month range. Copper rebounded impressively from the $3 area to close its overextension relative to the 200-day MA. A sustained move above $3.50 would confirm more than a temporary return to demand dominance. While not constituents of the CCI lead, zinc and nickel are all rallying from the lower sides of more than yearlong ranges.

Within the agriculture sector, there is a large “step” in the continuation chart for corn because of the backwardation between the July and December contracts. Prices steadied above 500 ¢ from late May and have since rallied to break the medium-term progression of lower rally highs. Provided it finds support above the recent low on the next pullback, potential for additional upside can be given the benefit of the doubt. Soybeans rallied from the lower side of its more than six-month range to break back above the 1500 ¢ by late May. It continues to consolidate in that area and a sustained move below 1465¢ would be required to question medium-term scope for additional upside. Wheat lost downward momentum from early April but will need to sustain a move above 750¢ to suggest a return to demand dominance beyond the short term. Live Cattle prices have been drifting below $125 since April but will need to sustain a move above that level to question potential for continued lower to lateral ranging. Lean Hogs encountered resistance near $1 from April 2011 and has spent much of the last two years ranging below 96¢. It has rallied back to test that level over the last month but will need to sustain a move above it to confirm a return to medium-term demand dominance.

In the soft commodity sector, Orange Juice has held a progression of higher reaction lows since January and a sustained move below 140¢ would be required to question medium-term scope for continued upside. Cocoa remains confined to a more than 18-month range. Cotton encountered resistance below $1 from March and has returned to test the region of the 200-day MA. Following nine consecutive days to the downside it posted a large upward dynamic today suggesting an unwind of the short-term oversold condition is underway. Arabica Coffee has trended consistently lower for two years and a break in the medium-term progression of lower rally highs, currently near 150¢, would be required to confirm more than temporary steadying. Sugar has a similar pattern.

While the general perception expressed by the media is of commodity sector weakness, the reality is much more nuanced. What appears clear is that the grain, bean and industrial metals sectors have returned to positions of outperformance. This is particularly noteworthy since most of the industrial metals are not constituents of the CCI which might explain why their recent rally is going largely unremarked in the media. If the US Dollar's weakness continues beyond the very short-term this should also act as a tailwind for the sector.