Commodity ETFs slowing with reduced volatility

KEY TERMS
OVB:  Outside Vertical Bar
VRCB: Volatility Reduced Compression Bar
Core Position: $50,000,000

PowerShares DB Agriculture (DBA):
08/10/2012 Closing Price: 29.94
INTERMEDIATE TERM (I.T.) SIGNAL:
Intermediate Term Trend is bullish.
Current Position: FLAT
Working Orders: SELL @ 29.70; STOP @ 30.45
Upcoming Break-Even: 28.96; Cover 10%
Current Downside Targets = 27.94 – 27.40
Projected Weekly Range: .75
Trading 185,000 Shares

I.T. ANALYSIS:

• Upcoming initial trade risk is $138,750 or .28%.
• DBA is a comprehensive agricultural ETF. Holdings include fairly equally-weighted futures contracts in sugar #11, live cattle, corn, soybeans, cocoa, coffee, lean hogs, wheat, and cattle feeder.
• For the second week in a row, DBA has formed a weekly VRCB. This pattern is formed when buyers and sellers offset each other and occurs less than 2% of the time. Coming off a bullish trend-reversing rally, we see these signals as an optimal place to enter a very low risk short position. Pay close attention to the “working orders” as the upcoming trade provides a window of only .75 before getting stopped out. Price action was nondirectional, closing near the midrange. Prices are currently overbought and having difficulty breaking through the resistant Bollinger band. We strongly believe an I.T. correction is due which should support our upcoming trade.

iPath DJ-UBS Grains (JJG):
08/10/2012 Closing Price: 62.32
INTERMEDIATE TERM (I.T.) SIGNAL:
Intermediate Term Trend is bullish.
Current Position: FLAT
Current Upside Target = 70.95
Projected Weekly Range: 3.66
Trading 87,000 Shares

I.T. ANALYSIS:

• JJG is concentrated in agricultural grain futures, holding 46% soybeans, 30% wheat and 24% corn.
• Last week violated the previous week’s low then rallied back to take out the previous high, forming an OVB. JJG closed slightly above the midrange, indicating 63.64 should be traded before 60.41, although the significant selling pressure and sideways movement lessens the probability. The short-term trend is consolidating while remaining within the 59 – 64 range recently. Current conditions are poor indicators of upcoming price action although we still see greater upside potential. We will patiently wait for a correction down to 55 before entering any long positions.

SPDR Gold Shares (GLD):
08/10/2012 Closing Price: 157.18
INTERMEDIATE TERM (I.T.) SIGNAL:
Intermediate Term Trend is bearish.
Current Position: LONG @ 155.33 on 07/25/12. STOP @ 155.73
Break-Even Price: 158.27; Cover 20%
Current Upside Target = 165.88
Projected Weekly Range: 3.98
Trading 100,000 Shares

I.T. ANALYSIS:

• Initial trade risk was $237,000 or .47%. Current trade risk is $0. Current trade profits are $185,000 or .37%.
• GLD’s single holding is gold bullion.
• GLD saw lower than average trading volume and exceptionally low volatility, with a weekly range of half the yearly average. Since May, GLD has trended sideways without a substantial breakout. Long periods of consolidation are normally followed by a breakout in the opposite direction of the last I.T. swing. GLD last saw a correction from 174 down to 148.53; we therefore believe the next significant move will be a bullish rally. Our current upside target is near the monthly price objective and should be realized by Q3 end. The 90% probability of seeing 157.97 before 152.19 is still in effect.

CurrencyShares Euro Trust (FXE):
08/10/2012 Closing Price: 122.21
INTERMEDIATE TERM (I.T.) SIGNAL:
Intermediate Term Trend is bearish.
Current Position: LONG @ 122.23 on 08/09/12. STOP @ 120.63
Break-Even Price: 124.74; Cover 20%
Current Upside Target = 125.59
Projected Weekly Range: 2.48
Trading 100,000 Shares

I.T. ANALYSIS:

• Initial trade risk was $251,000 or .50%. Current trade risk is $160,000 or .32%. Current trade losses are $2,000 or .01%.
• FXE seeks to track the movement of the Euro currency.
• Monday violated the previous week’s high, confirming an I.T. lower bottom, following the bearish trend. The rest of the week sold off to close out in the lower half of the weekly midrange. Bottom to top rallies are currently half the movement of top to bottom corrections, we are therefore tightening up our countertrend STOP to 120.63. If historical trends obtain, FXE should still trade higher, to at least our upside objective, before retesting the current lows. Price action indicates trading higher this week, although the trends and last week’s close disagree.

iShares MSCI Emerging Markets Index (EEM):
08/10/2012 Closing Price: 40.73
INTERMEDIATE TERM (I.T.) SIGNAL:
Intermediate Term Trend is bullish.
Current Position: FLAT.
Current Upside Target = 42.48
Projected Weekly Range: 1.60
Trading 135,000 Shares

I.T. ANALYSIS:

• EEM seeks to replicate the performance of the MSCI Emerging Markets Index by investing in the underlying international securities.
• Although last week saw abnormally reduced volatility, price action was definitely bullish. Friday’s intellectual close was in the top 10% of the weekly range, indicating prices should trade higher and close out strong this week. Last week was the first to clearly break out of the 36 – 40 restricted range. We believe this breakout will continue higher to 42.48 or higher if weekly closes remain strong. Once 68% of the previous top to bottom correction is recovered in this rally, we will be looking to enter a long position.

SPDR S&P 500 (SPY):
08/10/2012 Closing Price: 140.84
INTERMEDIATE TERM (I.T.) SIGNAL:
Intermediate Term Trend is bullish.
Current Position: FLAT.
Working Orders: SELL @ 139.55; STOP @ 140.93.
Upcoming Break-Even Price: 138.17; Cover 20%
Current Downside Targets: 134.16 – 133.03
Projected Weekly Range: 3.82
Trading 39,000 Shares

I.T. ANALYSIS:

• Upcoming initial trade risk is $53,820 or .11%.
• Last week pushed against the upper boundary of the current channel system SPY has traded within since early June. The weekly range was only 1.36, a number not seen since December 2010. The support trendline of the channel system is currently 134.82, 4.02 lower than Friday’s closing price. We believe this system will hold true and our downside price target will be realized within three weeks. These signals have led to our upcoming trade, a short position at 139.55, risking only .11% of the core position. Last week’s compressed range has allowed for an exceptionally rare, low risk trade. Closing below last week’s low will greatly support our trade and should lead to a longer-term correction.