While it is accepted wisdom that energy is the most important commodity complex, representing more than 80% of the dollar volume of trading in commodity markets, there are dozens of important raw materials and soft commodities that also serve as important barometers of the global economy.
Two of the major commodity indexes — the CRB Commodity Index and the S&P GSCI Commodity Index — seem to be performing a rather uncomfortable rollover after what seems to be a completed weak rebound off a climactic low in January 2016. The “rollover” effect is clearly illustrated at the right end of this chart.
This weakness in commodity prices comes in a seasonally strong time for commodity indexes, since oil and energy commodities comprise the majority of the S&P GSCI Commodity index and March begins the seasonally strong part of the year for the energy complex. Instead, the S&P GSCI Index has entered what looks to be a volatility squeeze, or a tight sideways trading range. Given how aggressively oil has sold off of late, it would not be surprising for that trading range to fail.
