Commodity ETFs see weakness in underlying products

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):
11/16/2012 Closing Price: 28.29
INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bullish.
Current Position: FLAT
Current Downside Targets = 28.59 – 28.34
Projected Weekly Range: 0.39
Trading 185,000 Shares
I.T. ANALYSIS:

  • DBA trade losses since 07/25/2012 equal $99,000 or 0.20%.
  • 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.
  • After moderate support kept prices above 28.50 for four week, bears overpowered bulls and pulled DBA to new correction lows. The two consecutive VRCBs, which displayed a large contraction of volatility, failed to reverse the direction into a rally. By trading below 28.58, DBA has made new lows and will prevent a rally for at least two more weeks. Price action was bearish and confirmed by Friday’s close below the midrange, below the open and below the previous close. Expect commodity prices to fall further next week, finding support near 28.00.

IPath DJ-UBS Grains (JJG):
11/16/2012 Closing Price: 54.89
INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bullish.
Current Position: FLAT
Current Downside Targets = 56.94 – 55.80 – 51.98
Projected Weekly Range: 1.93
Trading 50,000 Shares
I.T. ANALYSIS:

  • JJG total trade profits since 07/25/2012 equal $38,280 or 0.08%.
  • JJG is concentrated in agricultural grain futures, holding 46% soybeans, 30% wheat and 24% corn.
  • While three consecutive VRCBs normally indicate a reversal of selling to buying pressure, this was not the case for JJG. Largely due to severely reduced trading volume, this exceptionally rare pattern formed with consistently bearish price action, a counter-indicator for placing long positions. Instead of bouncing above 59.75 and forming a bottom, JJG fell out of bed and continued the current correction. Last Monday gap-lower-opened and continued lower from there. Price action was bearish and confirmed by the weekly close. After achieving 100% of both our downside targets, we have issued an extended downside target of 51.98.

SPDR Gold Shares (GLD):
11/16/2012 Closing Price: 165.88
INTERMEDIATE TERM (I.T.) SIGNAL:

Intermediate Term Trend is bullish.
Current Position: FLAT
Current Downside Target = 162.41 – 158.59
Projected Weekly Range: 4.60
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.
  • Although overall prices were higher compared to the previous week, GLD failed to make new highs at 168.55. The price represents the end of the current correction and the beginning of a new rally. GLD has seen very unpredictable trading action over the previous three weeks with three consecutive close reversals. Last week barely retraced down to the previous week’s midrange, a sign of bullish support, yet Friday’s close was below the midrange, open and previous close. Mixed signals plague many of the markets as investors are unsure about policy changes, the fiscal cliff and European debt situation. Remember, if GLD trades 168.55 before 162.29, the correction will end and new rally will begin.

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