Commodity ETF Alert January 2011 Portfolio Update

January 25, 2011

January has been an interesting month for commodities.  What happens in the markets this month often sets the tone for the entire year… so it will be intriguing to see how the final week plays out.

We’ve already seen some big moves… and I wouldn’t be surprised if that theme continues throughout the year.  There’s just a ton of macroeconomic data set to move the markets.

Here’s the thing…

Macroeconomic data is going to be a key driver of commodity prices this year… even more than normal.

You see, 2011 is a key year in the economic recovery.

This is the year when businesses are supposed to start hiring again.  More importantly, this is the year when we’ll likely see interest rates start their slow climb higher.

That means the world’s economic recovery is riding on the upcoming economic data.  And you can bet investors will be eagerly watching those key numbers.

What’s more, this hawk-like watching of economic data is bound to cause a fair amount of volatility.  Certain commodities could experience big swings when key numbers are released.

Some major factors which could heavily impact the price of commodities include the US Dollar, China’s inflation/interest rates, US employment data, the European debt situation, and European inflation.

But don’t worry…

I plan to keep a close eye on the macroeconomic data.  Of course, I’ll also be analyzing individual commodities for changes in the fundamentals.

One thing’s for sure… it’s going to be an exciting year for commodities.

And as always, the potential for profits is through the roof.  I’m going to make sure we don’t let the opportunities pass us by.

Now on to the position updates…

Position Updates

. . . . iPath Dow Jones-UBS Energy ETN (JJE) – Buy up to $24.00

Energy commodities are on the move.  Our most recent position is off to a quick start.  JJE moved 7% higher in under two weeks.

2011 is going to be a big year for energy commodities.  Both oil and natural gas have several catalysts that could propel them higher in the coming months.

I’ll get into the details of crude oil and heating oil below… but the bottom line is I expect JJE to thrive with the improving global economy.

Grab your shares of JJE now.  Buy up to $24 a share.

. . . . iPath Dow Jones-UBS Copper ETN (JJC) – Buy up to $58.00

Copper is hitting record highs… and it doesn’t look like it’s slowing down anytime soon.  Our position in JJC reached a high of $59.64 in early January… a solid 6% gain in under a month of trading.

Copper prices pulled back a bit when inflation concerns in China cropped up… but the commodity’s already resumed its climb.  And I expect we’ll be back to record highs in no time.

The fundamentals haven’t changed.  Regardless of inflation concerns, China is going to need copper to sustain their growth.  Until China’s growth slows down – which many not happen for years – copper is going to be in high demand.

Now’s the time to grab JJC if you haven’t done so.  It’s right below our buy up to price and I don’t think it will stay at these levels much longer.

. . . . iPath Dow Jones–UBS Livestock ETN (COW) – HOLD

Livestock is in high demand… and COW keeps climbing.  Our COW position hit a high of $31.61, for a nice 10% gain.

The fundamentals continue to paint a bullish picture for both cattle and hogs.  With the global economy strengthening… the demand for meat is growing by leaps and bounds.

Live cattle prices have pulled back a bit in recent days after reaching record highs.  But with the tight supply of cattle – and the growing global demand – it’s just a matter of time before prices move higher.

Meanwhile, lean hog prices are holding steady and could be positioning for another leg up.

I think we could see new highs in COW soon.  Hang onto your shares for bigger gains ahead.

. . . . United States Heating Oil Fund (UHN) – HOLD

Winter storms continue to bombard the US… and the price of heating oil keeps climbing. Our position in UHN is up nicely.

And the winter weather isn’t slowing down.

In fact, we could see another solid month or two of harsh weather before warmer conditions prevail.  What’s more, crude oil prices had been steadily climbing.  Higher crude oil prices also result in higher heating oil levels.

I think heating oil has more upside, so let’s continue holding our shares in UHN.

. . . . iPath DJ-UBS Platinum ETN (PGM) – HOLD

Platinum is making its move higher.  After holding steady the last couple months, PGM is finally setting new highs.  Our position has gained a solid 18% so far.

Here’s the best part…

Platinum is set to soar. 

China’s platinum imports increased 40% from 2009 to 2010.  That’s a massive increase… and a great sign that platinum prices are headed even higher.  Remember, platinum is used in catalytic converters, jewelry, and electronics.  As the economy improves, these are all items which will see increasing demand.

I think the run in platinum is just getting started.  Let’s hold on to our PGM shares for big time upside potential.

. . . . iPath DJ-UBS Cocoa ETN (NIB) – HOLD

Cocoa is on fire!

The recent surge in cocoa prices is sending our position in NIB to new highs.  NIB just hit a high of $47.55… a 10% gain.

As expected, the political tension in the Ivory Coast has erupted in a major conflict between the president-elect and incumbent president.  The incumbent refuses to acknowledge his rival’s victory in the last election.

The president-elect is calling for a ban on cocoa sales for a full month.  He’s trying to cut off the flow of money to the incumbent.

This is causing cocoa prices to soar.

The Ivory Coast situation is reaching a boiling point… and I think cocoa prices have a few more weeks to run higher.  I’ll be monitoring the situation in Africa very closely.

For now, I’m moving NIB to hold since we’ve climbed above our buy up to price.  Hang on to your shares for bigger gains.

. . . . iPath S&P GSCI Crude Oil Total Return ETN (OIL) – HOLD

Crude oil is seeing its share of volatility to start the year.

The price of crude oil spiked above $90 a barrel heading into 2011.  The improving economy and prospects of inflation sent prices running.  Don’t forget, the Chinese consumer is buying cars faster than ever… that means even more demand for gasoline and oil.

But bearish inventory news has since pulled crude oil back below the $90 level.

I expect this move to be temporary.  The long-term picture for oil is extremely bullish.  We may see some pullbacks along the way, but the trend in oil prices is definitely up.

Hang on to your OIL shares.

Action To Take

• Move iPath DJ-UBS Cocoa ETN (NIB) from Buy to Hold

Category: Commodity Trading