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Yamada: Commodities are in a ‘death cross’

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Legendary technical analyst Louise Yamada, managing director at Louise Yamada Technical Research Advisors, says commodities are looking bearish.

Long-term commodity prices are at a critical point. And, right now, the technicals indicate they're headed down.

That's what legendary technical analyst Louise Yamada, managing director at Louise Yamada Technical Research Advisors, says is ahead. She reached that conclusion by analyzing the long-term chart of the Thomson Reuters Equal Weight Continuous Commodity Index (the CCI). The CCI is a basket of 17 commodity futures such as contracts on metals, grains, energy, and livestock. It is considered a benchmark for commodity prices.

(Read: US corn, soy fall as better-than-expected harvest rolls on)

Since mid-February 2011, the CCI is down 25%. According to Yamada, that was the start of a bearish signal in the charts.

"It is a descending triangular formation which suggests that every rally along the way over three years has failed," says Yamada. "In other words, someone sold into each of the rallies over the past couple of years."

It's not just the descending triangle that has Yamada worried for the index. The moving averages have also been bearish for over a year and half.

(Read: Oil boosted by Libya output fall and US data; WTI jumps)

"The moving averages – the 10- and the 20- [month moving average] – are both declining," notes Yamada. "The 10 crossed under the 20 way back in February 2012, giving what people call a 'death cross'. But basically and simplistically, it's a sell signal."

What prices confirm a down-trend or may indicate a change in direction? Watch the video above to see analysis on the CCI from one of the most renowned technical analysts in the markets, Louise Yamada.

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