Eoin Treacy's view I was driving Mrs. Treacy to the airport this morning when I heard a rather interesting advert on the radio from a pension provider. It went something like "my hairdresser says I should invest in oil, my taxi driver says I should invest in soybeans, my financial advisor says contact XXX"

Veteran subscribers will be familiar with our view that commodities remain in a secular bull market. However we have often also said that this long-term view will be punctuated by occasional recessions. It is by no means clear whether the USA will enter a recession but much of Europe is in recession and much of Asia retains a tightening bias. The technical deterioration experienced by both the above commodities over the last month suggests the risk of a further deterioration has increased and that a more attractive entry point will become available.

The Latin American US Dollar Index is comprised of the Brazilian Real (33%), Mexican Peso (33%), Chilean Peso (12%), Argentine Peso (10%), Colombian Peso (7%) and Peruvian Sol (5%). All of these are major commodity exporters. The Index collapsed in 2008 as fears of global economic collapse became pervasive but also recovered strongly as economic growth picked up. It hit a medium-term peak between April and June, broke the progression of higher reaction lows in August and fell abruptly in September. It has paused in the region of the 2010 lows but a sustained move above last week's high of 108.5 would be required to suggest more than temporary support has been found.

Commodity related stock markets have suffered from the relative weakness of their respective currencies versus the US Dollar as well as declining prices for their exports.

Australian ASX300 Resources Index, ASX 200 Index and the Australian Dollar,
New Zealand NSZE 50 Fully Gross and the New Zealand Dollar
Canada TSX and the Canadian Dollar,
South Africa JALSE and the Rand
Russia RTSI and the Ruble,
Indonesia JCI and the Rupiah,
Brazil IBOV and the Real,
Mexico MEXBOL and the Mexican Peso,
Argentina MERVAL and the Argentine Peso,
Chile IPSA and the Chilean Peso,
Colombia IGBC and the Colombian Peso,
Peru IGBVL and the Sol

The commonality of the Dollar's advance against the above currencies as well as a host of others suggests widespread deleveraging. The Dollar is becoming increasingly overbought in the short-term but there is still no clear evidence that its appreciation has ended. A clear downward dynamic held for more than a day or two would begin to question short-term scope for additional upside. The rally posted over the last few weeks has broken a relatively consistent downtrend and significant trend deterioration would be required to question medium-term scope for additional upside.

A number of the above stock market indices have also fallen abruptly. They are becoming increasingly overextended and also require counter trend dynamics to check momentum. They have all experienced significant trend deterioration and periods of support building as well as sustained moves back above their respective 200-day MAs will be required to signal a return to medium-term demand dominance.