Martin Pring is the Investment Strategist to the AdvisorShares Pring Turner Business Cycle ETF (DBIZ)—and since 1984, he has published the “Intermarket Review,” a monthly global market report revered among analysts and market technicians. Martin shares his technical analysis on short and long term market momentum and the potential effect for commodity prices.
Since records began in the early nineteenth century industrial commodity prices have alternated between secular bull and bear markets averaging 20-years. Sometimes, such as the post 1980 period, “bear markets” have taken the form of trading ranges, but the alternating pattern nevertheless still exists. The current secular bull began in December 2001. If 2011 marked its peak it will have been one of the shortest on record. Our work though, argues otherwise.
One indicator that we have found to be helpful in this regard is a price oscillator (trend deviation) based on the relationship between a 60- and 300-month simple moving average. Secular buy and sell signals are triggered when it crosses above and below its 48-month MA. These turning points have been flagged in the lower panel of Chart 1 with the red and green arrows. The secular model, referred to in the text, uses these signals along with a trend reversal factor as confirmation. Hence the occasional black highlighted neutral status.
Chart 1 US Commodity Prices versus a Secular Trend OscillatorUp until a couple of months ago the indicator itself had been in a declining phase and was getting pretty close to its fifth secular sell signal since the mid-nineteenth century. However, it has now started to tick up and that suggests higher prices. We would be skeptical of this small change were industrial commodity prices at the top of a primary bull market. However, long-term momentum in Chart 2 has just started to turn up. This clearly points more in the direction of a youthful bull than a tired bear.