|At the beginning of January 2009, I suggested to readers that the Commodity Research Bureau Index (CRB) might well have hit an intermediate-term bottom. Since then, the CRB has traded in a relatively tight range, neither rebounding after its tremendous fall nor increasing in value to any appreciable extent.|
|FIGURE 1: CRB, DAILY. The CRB index lacks any clear direction other than sideways.|
|Graphic provided by: Wealth-lab.|
|As can be seen in Figure 1, both price and the relative strength index (RSI) are very flat. On the bearish side, the RSI has been unable to break above 50, thus indicating a continued level of weakness in the CRB. On the bull's side is the fact that the CRB has continued to remain above the slightly upward-sloping purple trendline.|
|Now, however, we are at an important juncture. For the CRB to have any chance to rebound, it must successfully test the support line. Failure to hold the line would likely lead to a retest of the December 2008 lows. Failure to hold that low would likely mean a resumption of the previous downward trend and a continuing series of fresh new lows.|
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