The commodities market smells deflation 

Source: Elliott Wave International

Uncertainty is a market favorite. It’s why they exist in the first place.

Business is what hates uncertainty.

If you run an import/export business, for example, you need predictability in terms of rules and regulations, supply chains, and so on in order to plan your logistics.

Companies have, of course, had to navigate a great deal of uncertainty as a result of the pandemic induced lockdowns.

Numerous countries’ domestic demand has remained strong, but supply chain concerns have caused many commodities and materials (such as microchips) to become scarce, resulting in increased costs.

Inflation in both producer and consumer prices has accelerated significantly. However, when shortages evolve into gluts, there is a growing realization that this may alter next year.

Container ships may be seen waiting at ports all across the world, from Los Angeles to Singapore and Piraeus, in satellite photos like these. Many of these loads will contain things that are currently in demand, but there is a growing concern that they may not. In order to protect themselves from the uncertainties, several businesses have ordered twice or even three times what they would typically need. This could indicate that there are too many goods in relation to demand next year.

Perhaps the commodity markets are already smelling deflation next year as this year’s price rise turns to deflation next year.

The CRB index has broken below its uptrend channel, finally succumbing to trend exhaustion as evidenced by the RSI divergence.