Commodity ETFs diverge; grains and gold turn bullish

INTERMEDIATE TERM SIGNALS & MARKET ANALYSIS

 ETF ANALYSIS FOR:

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

START DATE:                                      July 25, 2012
CORE POSITION:
                              $50,000,000
CURRENT PROFIT:
                          $1,433,614 (2.87%)
LARGEST DRAW-DOWN:
                $160,590 - (0.32%)
RETURN-ON-RISK:
                           8.93 : 1
(UNLEVERAGED and FULL SHARE VALUE)

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

 PowerShares DB Agriculture (DBA):
11/09/2012 Closing Price: 28.69
INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bullish.
Current Position: FLAT
Working Order: BUY @ 28.96; STOP @ 28.57

Break-Even Price: 29.35; COVER 27,750 (15%)
Current Downside Targets = 28.59 – 28.34
Projected Weekly Range: .43
Trading 185,000 Shares
I.T. ANALYSIS:

  • DBA trade losses since 07/25/2012 equal $99,000 or 0.20%.
  • Initial trade risk is $72,150 or 0.14%.
  • 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 formed its second consecutive VRCB last week, a pattern that occurs less than two percent of the time. Although the previous week’s VRCB was largely because of reduced trading volume, last week formed because of an equalization of buyers and sellers. Finding support early in the week, DBA fell back down to close out in the bottom quartile of the trading range. Price action was bearish confirmed, indicating trading should start lower this week. We have issued a BUY at 28.96 with the anticipation of trading 28.64 early this week; if DBA rallies up to 28.96, a weekly OVB will form generating an optimal buy signal.

IPath DJ-UBS Grains (JJG):
11/09/2012 Closing Price: 57.15
INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bullish.
Current Position: FLAT
Working Order: BUY @ 58.59; STOP @ 56.66

Break-Even Price: 60.52; COVER 7,500 (15%)
Current Downside Targets = 56.94 – 55.80
Projected Weekly Range: 1.48
Trading 50,000 Shares
I.T. ANALYSIS:

  • JJG total trade profits since 07/25/2012 equal $38,280 or 0.08%.
  • Initial trade risk is $96,500 or 0.19%.
  • JJG is concentrated in agricultural grain futures, holding 46% soybeans, 30% wheat and 24% corn.
  • Commodity grain futures have seen a significant reduction in trading volume, down more than 50% in the last three weeks. The below trading volume paired with reduced volatility has formed three consecutive VRCBs, an exceptionally rare technical pattern. This normally indicates a change of directional movement and often forms at the top of rallies and bottom of corrections. We believe the grains have found a moderate to strong support level that will keep prices above 55. We currently have a Working Order to BUY 50,000 shares of JJG at 58.59, risking $96,500 or 0.19% of our core position. This order entry is a very low risk trade with historically high probabilities of success.

SPDR Gold Shares (GLD):
11/09/2012 Closing Price: 167.82
INTERMEDIATE TERM (I.T.) SIGNAL:

Intermediate Term Trend is bullish.
Current Position: FLAT
Current Downside Target = 162.41 – 158.59
Projected Weekly Range: 4.58
Trading 35,000 Shares
I.T. ANALYSIS:

  • GLD total trade profits since 07/25/2012 equal $413,695 or 0.83%.
  • GLD’s single holding is gold bullion.
  • After achieving 100% of our initial downside price target, gold rallied up $6 last week on the news of President Obama’s reelection. While equity markets tumbled, safe havens such as gold found strong support from investors. Price action was bullish and confirmed by Friday’s close above the midrange, above the previous close and above the open. After four weeks of steady sell-off, GLD finally managed to violate and close above the previous week’s high. Price action dictates that trading will be higher this week with a continuation of people moving into hard assets.

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