Commodities May Drop 11% to Lowest Since ’10: Technical Analysis

Commodities may fall 11 percent in the next few weeks to the lowest since May 2010, according to technical analysis by Bank of America Corp.

The Continuous Commodity Futures Price Index of 17 raw materials is “on the edge of breaking down” and will drop to 447, MacNeil Curry, head of foreign-exchange and interest-rate technical strategy at Bank of America in New York, said by e-mail yesterday. The gauge fell as low as 447.39 on an intraday basis in May 2010, according to data compiled by Bloomberg.

An index of the six main industrial metals traded on the London Metal Exchange is poised for a second weekly drop this week, along with gold and silver for immediate delivery. Corn and wheat are slumping for a third week in Chicago. Crude oil is heading for a fifth week of declines in New York and arabica coffee reached the lowest price since 2006 yesterday.

“A sustained break of 506/500 opens 10 percent additional downside,” Curry said.

The commodities measure settled yesterday at 503.99, fpr a drop of 9.1 percent this year. Two closes below 500 would mark a sustained break, according to Curry.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index. The CCI, as an equally weighted index, is more representative of performance across commodities than the Standard & Poor’s GSCI gauge and Dow Jones-UBS Commodity Index, which emphasize energy, according to Curry.

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