Many seem to be talking about the growth/reflation theme that has taken place post election. Did this theme really start improving post election?
The chart below would put a little question into the date. Below looks at the TR Commodity index over the past 40-years.
The index hit support at (1) and started to moving higher. When did the index hit a low last year on a monthly closing basis? The monthly low took place at the end of February 2016, 9-months “before” the election.
The index remains in a bearish downtrend since the highs back in 2011, which looks to have formed the head, of a multi-year head & shoulder topping pattern. The swift decline that started in July of 2014, took it down to support at (1). This is where a counter trend rally started, that many call the reflation/growth rally. Regardless of what label one wants to put on the rally, the index did hit triple resistance in a downtrend at (2) and has turned south of late.
The growth/reflation theme would be put into question, if neckline support at (1), would happen to give way! A support break at (1), would suggest that dis-inflation or de-flation is in play.
So far weakness in the index since the highs back in 2011, has not impacted stocks in a negative way at all. Stocks and this index did bottom together at (1) and both have struggled a little, as resistance was hit at (2) in the chart above.
Thanks for reading.
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This post originally appeared on Kimble Charting.
Twitter: @KimbleCharting
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