Commodity ETFs fall as bears take control

INTERMEDIATE TERM SIGNALS & MARKET ANALYSIS

ETF ANALYSIS FOR:

DBA – JJG – GLD – JJC – USO – UNG – FXE – EEM – SPY

KEY TERMS

OVB:  Outside Vertical Bar
VRCB: Volatility Reduced Compression Bar

Core Position:
$50,000,000
Current Profits:
$1,615,614 (3.23%
(UNLEVERAGED and FULL SHARE VALUE)

 PowerShares DB Agriculture (DBA):
10/12/2012 Closing Price: 28.91
INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bullish.
Current Position: FLAT
Current Downside Targets = 28.59 – 28.34
Projected Weekly Range: .61
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.
  • DBA experienced its lowest weekly close since early July as commodity prices continue to fall. Price action was bearish last week, confirmed by Friday’s close below the midrange, below the open and below the previous close. DBA failed to trade up and confirm a bottom; instead, it made new monthly lows. Currently in a full correction, expect DBA to trade lower this week with strong support entering the market between 28.59 and 28.34. If prices close this week below 28.85, expect these support zones to be violated and further selling to continue.

iPath DJ-UBS Grains (JJG):
10/12/2012 Closing Price: 58.05
INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bullish.
Current Position: FLAT
Current Downside Targets = 56.94 – 55.80
Projected Weekly Range: 2.57
Trading 87,000 Shares

I.T. ANALYSIS:

  • JJG is concentrated in agricultural grain futures, holding 46% soybeans, 30% wheat and 24% corn.
  • As expected, last week’s trading range was within the previous week’s range with a bias toward the downside. Price action was nondirectional with nearly equal highs and lows. Friday’s close in the bottom half and slightly below the previous close indicates this week should trade lower, violating 57.52 before trading 60.56. Sideways movement occurs when the market is unsure about current price levels, usually correcting or rallying significantly, evidenced by the stagnant prices from March to June, then followed by the 40% summer rally. Our current price objectives are in line with the correction where we believe strong support will initiate a rally.

SPDR Gold Shares (GLD):
10/12/2012 Closing Price: 170.06
INTERMEDIATE TERM (I.T.) SIGNAL:

Intermediate Term Trend is bullish.
Current Position: FLAT
Current Downside Target = 162.41
Projected Weekly Range: 3.07
Trading 35,000 Shares

I.T. ANALYSIS:

  • GLD’s single holding is gold bullion.
  • We exited our long GLD trade last week with profits totaling $373,695 or 0.75% of our core position. Initial trade risk was $139,650 or 0.28%. Buying pressure exhibited throughout the summer appears to have been fully neutralized over the previous two weeks as gold prices steadily fall. The VRCB from last week was the initial indicator of the changing trend. This week also formed a VRCB, except price action was very bearish, closing in the lower 25% of the weekly range. Due to the definitive downward movement, the VRCB can largely be attributed to the below average trading volume and not equal buyers and sellers. Expect trading to be lower this week, moving towards our downside price target.

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