Deflation…simply means falling prices.
The 4-pack below reflects that the bond market believes that ”Deflation/Falling Prices” is the key theme as the leading commodity index’s is breaking below last summers lows.
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The Power of the Pattern reflected that the Deflation theme setup first took place last June (see set up here) as bearish rising wedges were taking place in the Commodities complex and support was giving way. A year later these patterns have caused the Commodities complex to create a series of lower highs. The CRB is down 22% and the CRX is down 26% since last May’s peak of the bearish rising wedges. These multi-year rising wedges don’t end in just a few months!
So has the Deflation theme run its course and the bottom is in place? The bond players have been pretty spot on, per the global pricing picture. The 10-year yield is on support dating back to the early 1990’s. Watch this line in the sand as close as any of these support lines.
Also don’t forget the situation Copper was in 9 days ago (see post here)…Copper has now broken below this flag pattern!