Relative Strength Index (RSI) is a technical-momentum indicator which attempts to determine when a market is in an overbought or oversold condition. It is deemed to be overbought when above 70 and oversold when below 30, but traders often have individual preferences and set their parameters accordingly. RSI is best used as a valuable complement to other individually preferred technical tools.
The agriculture sector remains the most overbought currently with nine out of 19 commodities having a nine-day RSI reading above 70. Kansas wheat and Arabica Coffee continue to see a bullish pull from cold weather in the US Midwest and dry conditions in Brazil and both are currently together with sugar trading more than 2 percent above their five-day moving average.
The energy sector has paused after the strong rally during the first half of February with all five commodities currently losing momentum. Weather forecasters in the US are now finally predicting milder weather ahead and this has triggered the biggest drop in six years for natural gas while WTI crude has been given back some its relative strength versus Brent crude.
Precious metals continued to find support from the political uncertainty related to Ukraine and weaker economic data from China and the US, the latter most likely caused by the cold winter. Both gold and silver are currently overbought and the fact that we have not seen a clear extension following the technical break above 1,337.8 USD/oz. now raises the risk of a correction, potentially back down towards 1,308 USD/oz.