Commodities May Decline 11% on Fibonacci: Technical Analysis

Commodities may fall 11 percent by the second quarter next year as the biggest rally in 11 months runs “out of steam,” according to technical analysis by Commerzbank AG.

The Standard & Poor’s GSCI Total Return Index of 24 raw materials will first slide toward its 200-week moving average at 4,781.68 before testing 4,442.35, the 50 percent Fibonacci retracement of its advance between 2009 and 2011, Axel Rudolph, a London-based technical analyst at Commerzbank, said in an Aug. 20 report. The decline is forecast by the second quarter next year, he said by e-mail today.

“We would expect this 4,442 zone to hold the initial test,” Rudolph wrote. “Failure to do so would see losses to 4,212.50, the 2012 low.”

The S&P GSCI Total Return Index, reflecting the cost of maintaining positions in futures markets, gained 1.3 percent this month to 4,915.4 by 9:31 a.m. in London, heading for the third monthly advance. The gauge is up 0.5 percent this year after a 4.9 percent jump in July, the biggest since August 2012.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching highs or lows.

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