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When looking for clues on how to build a portfolio, the Morgan Stanley Commodity Related Equity Index (CRX) and the Commodity Research Bureau Index (CRB) sent quality messages to protect risk asset values and offered clues that the global economy was going to soften some back in 2008 and 2010. As we can see in the accompanying chart, they broke below key rising support lines (1) and (2).

Now the CRX and CRB are rolling over in price, having created lower highs, and are breaking below rising support lines at (3).

 

 

For whatever reason, Commodities have been suggesting something different from the message of the stock market. I highlighted the relative weakness in my Mixed Signal post, when the Power of the Pattern was suggesting that we look more closely at the CRX's price action than that of the S&P 500.

Basic Materials and High Yield Junk bonds were sending signals of above-average risk back in early March (see post here). Since that time, both IYM and JNK are reflecting lower prices, while the broad market did not. Are these signals to pay attention too?

 

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