Right now we're watching some interesting divergences within the commodity complex. Sean wrote a
recent post about oil's rise, and he mentioned that many analysts see this as a sign that the U.S. might avoid recession. What’s puzzling is that oil is currently diverging from other commodities that are typically seen as barometers of global growth, like the CRB Raw Industrial Spot Index (RIND), which tracks a basket of 15 economically sensitive commodities, excluding oil (see the chart below).
Some of the technicians we follow are screaming that the strong correlation between oil and equity markets indicates that oil will likely lead the markets higher. They may be correct, but we're currently investigating the potential correlations and lead times between oil, copper and the CRB RIND. Stay tuned for the results of Sauro Locatelli’s research on which commodity is more likely to be wrong... coming soon to a blog near you.
