05-06-2008: June CRB (Continuous Commodity) Index: As Dollar Strengthens, Inflation Lessens
While the NYBOT is busy screwing up some of its most heavily-traded as well as some of its least heavily-traded contract specifications, confusion reigns supreme. Nowhere is the mess made by New York markets more evident than in an attempt to revive the CRB Index in its newest form, the CCI.
It is still possible to find many sites on the internet where the former CRB Index is still described as if it were trading today. Consider the following obsolete description from a prominent commodity broker's site:
Then consider a "different story" obtained from a different site, described below.
We don't pretend to have eliminated the confusion entirely on this site. One can still find quotes for the old CRB Index as well as the CCI Index and they are off from each other by nearly 100 points. The new CCI only trades for $500/point on the index, as did the old CRB traded for $500/point. The CCI is so thinly-traded that it is impossible to get accurate information from the CFTC on Commitment of Traders, or find any form of reasonable options being traded. Therefore, some of our indicators we normally use are not available for this contract. Our broker does not even trade the RJ/CRB Index, which is even worse for which to find a market than the CCI. The two indices are not identical in their readings at this time, having diverged off by around 100 points.
What we decided to do, for better or worse, was to continue to call the CCI ("Continuous Commodity Index") the CRB Index, which is not exactly a misnomer, and convert all of our previous data for the CRB Index into data for the new CC Index.
June CRB (Continuous Commodity) Index:
June CRB (Continuous Commodity) Index:
Our traditional way of analyzing the CRB Index (or the "Continuous Commodity Index" or whatever the NY market wants to call it, has been to examine the original 17 components of the CRB Index before the Exchange started screwing around with it. The simple moving average crossover program below run for each commodity determines the net trend of all.
Eleven out of seventeen are trending down at the moment, or there appears to be a 65% chance of further decline in the Index. Underlying a recent decline in the CCI Index is the perception from the Federal Reserve that the latest round of interest rate cuts may be over. This caused the U.S. Dollar to shoot upward, and reduces the problem of inflation in the U.S. Commodities in general took it on the chin. Grains and energies sank at least 3% in a dollar-related selloff. The CRB Index fell to the 3-1/2 week low.
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The above point-and-figure chart is giving a conventional sell signal.
We are headed toward a cyclical high and a weak seasonal up period.
Our best-performing internal program is "WilderRT." It is not giving any signal at the moment.
Results of "WilderRT" for CCI Index (blue lines = successful trades, red, unsuccessful): (Not always in the market.)
Our third system has just triggered a buy signal. (Note, disregard the year date on the chart. Our regular readers know this is not a Y2K-compliant system, but it still works.)
The point value is $500. Initial margin on a single contract is $6,000. Options are not available.
Scale trade sellers are entering the market in this price range for the longer term. Note this chart is for the RJ/CRB, not for the CCI Index. But the relative pattern is the same. Note the disparity in index value between the two.
We could not get accurate Commitment of Traders data from the CFTC for this thinly-traded commodity.
The average volatility shown below suggests that the last major change in direction to up at a volatility low point remains intact.
We could find no options for this commodity.
Here's an intraday chart for the previous day ( 5/05 ).
Risk Versus Opportunity Report
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CRM8 June CC Index
High Price: 557.8
Current Price: 540.5
Low Price: 505.1
Risk: -0.065
Opportunity: -0.133
(O/R) Ratio = 2.046
Level Table:
| Factors | Weighted Points |
|---|---|
| Parabolic Chart | - 1 |
| Nirvana Chart | + 1 |
| News | - 1 |
| Point & Figure | - 1 |
| Cyclicals | + 1 |
| Seasonals | + 1 |
| Internal System 1 | 0 |
| Internal System 2 | 0 |
| Third System | + 1 |
| Commitment of Traders | 0 |
| Historic Range | - 1 |
| Range/Volatility | + 1 |
| Level Table | - 1 |
| Other Factors | - 1 |
| Total | - 1 |
Place 2 June CC Index on a Sell Watch with stoploss @ +7.15 above the get-in point.________________________________________________________________________________________________________E.L.
