Lumber's quick cooldown could be just the beginning for commodity market, according to one chart

The commodity market has been red hot this year, but the tide appears to be turning.

Lumber, for example, has seen one of the most jaw-dropping moves in the space. At its peak in May, it was up more than 90% for the year. It has since reversed and is now down nearly 30% for 2021.

This is just the beginning of a broader downturn for commodities, according to Lakshman Achuthan, co-founder of the Economic Cycle Research Institute. Achuthan said it all comes down to cycles and this point of the cycle indicates a move lower.

"Cycles in global industrial growth are closely linked to cycles in industrial commodity prices, including lumber," Achuthan told CNBC's "Trading Nation" on Wednesday. "While I know — lumber notwithstanding — people are still pretty bullish on commodities, with a cyclical downturn in global industrial growth getting underway things are going to shift the other way."

Achuthan points to a chart based upon his firm's research that shows the move lower after the strong comeback in demand late last year and early this year as the economy rebounded from the pandemic lull. Higher industrial demand inflates the price of limited resources such as copper, lumber and oil.

"You've seen about a 150 percentage point increase in commodity price inflation through about earlier this year, a couple of months ago," he said, "and then now in March, our research has showed a pivot point the other way on global industrial growth to the downside."

Investors should watch this metric as an early warning sign, Achuthan said. He predicts this move lower in raw goods at the beginning of the supply chain will eventually pass through and show up in global PMI numbers and even the producer price index, which measures inflation.

PPI in May rose by 7.3% on a year-over-year basis, a record high, and added to fears of runaway inflation. This latest data from Achuthan suggests higher inflation may be transitory.

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