CRB INDEX HITS SIX-MONTH HIGH -- BASIC MATERIAL LEADERS ARE ALCOA, TEMPLE INLAND, AND LOUSIANA PACIFIC
CRB INDEX REFLECTS COMMODITY BREAKOUT... The CRB Index of commodity prices is trading at a new six-month high today. Since February, the CRB has been trading sideways in a triangular consolation pattern. In late August, it exceeded its May peak to signal resumption of its major uptrend. In today's trading, gold and silver are the biggest gainers. However, the rally is widesread with 13 of 17 commodities trading higher. The grains are also strong. Chart 2 puts the recent action in a more bullish perspective. It shows a huge "double bottom" formed during 1999 and 2001 followed by a major bullish breakout late last year. Chart 2 also shows that this year's consolidation pattern has stayed above last year's breakout point near 230. That's a sign of strength. Chart 3 shows an even longer term view. It shows that last year's rally stopped at a major resistance line drawn over the 1988/1996 peaks. A new commodity upleg could result in a retest of that line. An upside penetration of the fifteen year trendline would leave little doubt that commodity markets are in the midst of a major bull trend.
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BASIC MATERIAL LEADERS FOR TODAY... When commodity prices are rising, basic material stocks benefit. Two of today's standouts are Temple Inland and Alcoa. TIN is breaking through chart resistance around 50 on very strong volume. Alcoa is reaching another 52-week high.
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RISING LUMBER HELPS LOUISIANA PACIFIC... Another rising commodity that isn't even included in the CRB Index is lumber. Lumber just recently climbed to the highest level in two years and also appears to have entered a new uptrend. Louisiana Pacific is a lumber/plywood producer that benefits from rising prices. Its monthly chart shows LPX having just broken above 12.5 to initiate a new uptrend. Today, the stock is trading at the highest level in two years. One of the best ways to benefit from rising commodity prices is to buy stocks tied to those commodities. Although a lot of attention is being paid to rising gold (and silver) shares, the fact is that all commodity-related stocks are rising.
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