There is NO Commodity Bubble!

There seems to be an inaccurate perception that there is a commodity bubble, and that nearly all commodities are at record prices. This is not the case, and the charts will prove it. The charts don't lie, and while anyone can argue with my reasoning, they can't argue with the true picture that the charts depict.

Exception - Energy-Related Commodities
Generally speaking, only the energy-related commodities are near record high prices. Energy-related commodities (including corn and soybeans -- biofuels) are the only exception to my argument that there is no bubble. Even biofuel grains, it could be argued, aren't in bubble territory. While they are near all-time highs, prices for corn and soybeans have been flat for weeks! The biofuel bubble is solely the fault of Congress because of their idiotic ethanol mandates and the consequential impact on food prices. Let's hold them responsible for food inflation. It is at their feet that the blame justly lies. Most other commodities are well off their record-setting prices from the early part of this year.

The Price of Sugar is Sweet -- for Consumers!

One example of this is sugar (see the daily chart below). Even though sugar is considered to be a biofuel commodity, sugar prices have fallen 35% from their most recent highs. Sugar is trading below both its 50-day and 200-day moving averages (shown in blue and magenta on this daily chart)! And as can be seen from this chart, it's not even close! That's significant -- sugar is well BELOW the 200-day moving average! That is hardly a bull market bubble! That is a confirmed downtrend!

Wheat Dropped Like a Rock!
Wheat is also trading 41% lower than its record high from just a few months ago (below). A huge 41% drop! That is also a confirmed downtrend. It is also trading below both its 50-day and 200-day moving averages, and closed today at the lowest price in six months. As recently as last week, volume indicators suggested a possible bottom for wheat. It hovered around its 200-day moving average for a couple of weeks, but in the past few days, it has dropped below the 200-day moving average. One can only wonder how far the price of wheat will fall!

Other Commodities Also Broadly Lower

Most of the soft commodities are likewise currently trading well off their highs, and within a relatively narrow range of prices. Coffee and cotton prices have been either trending down or flat over the past few months. Orange juice is also in a confirmed downtrend, with prices at their lowest in 12 years; this is surprising given the devastation of the hurricanes 3 years ago, but the charts don't lie. Cocoa is higher, but well off its highs and trading relatively flat in recent days and weeks. Nickel prices are at their lowest in two years, and most other industrial metals are flat to weak. Contrary to the erroneous perception, most commodities are generally trading well within established historical prices and are neither overbought nor in bubble territory.

Before the soft commodities began to trade electronically slightly more than one year ago, the charts were much more erratic and looked like radio static. Now that electronic trading has brought much-needed liquidity to the soft commodity markets, the charts trade much more like smooth sine waves. Many of these soft commodities have now become a joy to trade compared with how they used to be. The beginning of electronic trading has brought much-needed liquidity to the markets. But there is one thing it hasn't brought -- higher prices!

There is no commodity bubble!