Is the commodities rally done?

Here’s the daily continuation chart of commodity index futures since July. Note the new highs on weakening momentum:

Source: futures.tradingcharts.com

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The oil and base metals markets are similar. Here’s the base metal index, from kitcometals.com:

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And oil futures, from stockcharts.com (3-year chart):

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See also:

Copper looks set to fall hard (12/21/09)

Gold:Silver ratio approaches support

The relative values of gold and silver are a measure of risk aversion, akin to the VIX. Silver is largely an industrial metal and reflects appetite for commodities in general, whereas gold is owned as hard cash for safety.

Witness the premium silver fetched in the commodities mania of 2007 to July 2008, and the soaring value of gold in the panic last fall. Like the VIX, it registered a peak in October and November and did not confirm the equity lows in March. There is also a correlation in recent months between Gold:Silver and the US dollar index (only 3% bulls there yesterday, by the way).

We’re now a few points above a level where two major trend lines intersect, though the RSI and MACD are already in oversold territory. A quick, terminal spike in silver would complete the pattern nicely:

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Readers know that I am a stomping dollar bull and precious metals bear at the moment. Gold bugs, take a chill pill — I’m all for a gold standard, and yes, gold will continue to outperform most other assets in this depression, but that doesn’t mean the metals aren’t overbought like everything else in this reflation/recovery mania. Possible spike tops notwithstanding, I expect both silver and gold to fall from here, and for silver to fall harder. I expect $14 within 6 weeks, followed by $12 early next year, and possibly even $8 in a year or two.