Commodity ETFs face resistance, some upside visible

INTERMEDIATE TERM SIGNALS & MARKET ANALYSIS

KEY TERMS
OVB:  Outside Vertical Bar
VRCB: Volatility Reduced Compression Bar

Core Position: $50,000,000

PowerShares DB Agriculture (DBA):
09/07/2012 Closing Price: 30.24
INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bullish.
Current Position: FLAT
Current Downside Targets = 27.94 – 27.40
Projected Weekly Range: .56
Trading 185,000 Shares

I.T. ANALYSIS:

  • 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.
  • Although DBA closed out the previous week in the upper 20%, it failed to make new weekly highs. Instead, last week’s range was restricted to a lower high and higher low, forming an inside vertical bar. Friday’s close in the lower half of the weekly midrange, lower than Tuesday’s open and lower than the previous week’s close, all indicate trading should be lower this week. Commodities have recently struggled to continue the bullish momentum seen two months ago. Weak closes and insignificant price action lead us to believe trading should be slightly lower this week. If this week trades 29.88, a new I.T. top will form, signaling a correction has begun.

iPath DJ-UBS Grains (JJG):
09/07/2012 Closing Price: 63.36
INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bullish.
Current Position: LONG @ 62.25 on 08/20/2012; STOP @ 62.25
Current Upside Target = 70.95
Upcoming Cover Price: 64.93; Cover 17,400 (20%)
Projected Weekly Range: 2.32
Trading 87,000 Shares; COVERED 17,400 (20%) @ 64.45,

I.T. ANALYSIS:

  • Initial trade risk was $191,400 or .38%. Current trade risk is 0%. Current trade profits are $115,536 or .23%.
  • JJG is concentrated in agricultural grain futures, holding 46% soybeans, 30% wheat and 24% corn.
  • JJG has formed an inside vertical bar for the second consecutive week. Nondirectional price action is characteristic during times of consolidation at the top and accumulation at the bottom of markets. Friday’s close barely lower than the weekly midrange is a weak indicator of future trading. The restricted range resulted in a Volatility Reduced Compression Bar, frequently seen near tops and bottoms. Failure to continue higher over the last two months has resulted in an additional Sell Coverage of 17,400 shares at 64.93.

SPDR Gold Shares (GLD):
09/07/2012 Closing Price: 168.44
INTERMEDIATE TERM (I.T.) SIGNAL:

Intermediate Term Trend is bullish.
Current Position: LONG @ 158.81 on 08/21/2012; STOP @ 161.89
Upcoming Cover Prices: SELL 7,000 (20%) @ 169.35
Current Upside Target = 165.88 – 176.15
Projected Weekly Range: 5.33
Trading 35,000 Shares; COVERED 3,500 (10%) @ 164.12

I.T. ANALYSIS:

  • Initial trade risk was $139,650 or .28%. Current trade risk is $0. Current trade profits are $321,930 or .64%.
  • GLD’s single holding is gold bullion.
  • GLD continued its exceptionally bullish climb last week, fulfilling 100% of our upside price target, published on July 21, 2012. We have issued a revised, more aggressive price target of 176.15. Price action was clearly bullish for the third week, closing in the upper 11% of the weekly range. The stagnant accumulation period from mid-May till mid-August has certainly been worth the wait; our highly anticipated long position is currently up $321,930 or .64% of our core position. Last week nearly met our second profit-taking price of 169.35 where we will sell an additional 7,000 shares and lock-in $75,460. There exists an 82% probability of trading 169.01 this week with a very small chance of retracing to 163.65.

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