BLBG: Commodities to Tumble as ‘Blob’ Eats Credit: Technical Analysis
Aug. 10 (Bloomberg) -- Commodities may skid 43 percent over the next 16 months, returning to the four-year low of February 2009, as deflationary concerns commandeer financial markets and drain credit, said Walter J. Zimmerman Jr., the chief technical analyst at United-ICAP in Jersey City, New Jersey.
The attached chart shows that the Standard & Poor’s GSCI Index of 24 raw materials has become tied to swings in the S&P 500 index on a daily basis since September 2008. Zimmerman said the stock market has been dictating prices of crude oil, gasoline, copper and silver on an hour-by-hour basis for more than a year, a sign that commodities are trading on economic expectations rather than their own supply and demand. He said that has never happened before.
“The Blob, or the collective mood of the consumer, has eaten the independence of key commodities,” Zimmerman, who has studied price patterns since the early 1980s, said yesterday in a telephone interview from Tyler Hill, Pennsylvania. “This all speaks to the fear and pessimism, the contraction, the conservatism, the unwillingness to take a big position to the upside. This is the psychology of a deflating economy.”
The GSCI index, which gained 0.5 percent yesterday to close at 536.706, may fall to 306 by the end of 2011 should the gauge break below 365, Zimmerman predicted. The index reached 305.585 on Feb. 19, 2009, the lowest level since January 2005.
“The Blob,” a horror movie released in 1958 and starring Steve McQueen, depicts a giant amoeba-like alien that terrorizes a small community in Pennsylvania. In its 1988 remake, “The Blob” results from a secret government biological-warfare program that feeds on fear, panic and anger.
In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index.
--Editors: Michael Arndt, Steve Stroth.
To contact the reporter on the story: Yi Tian in New York at Ytian8@bloomberg.net.
To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net
