Commodity ETF Alert July 2010 Portfolio Update

| July 27, 2010 | 0 Comments

July 27, 2010

Commodity markets have been rejuvenated in recent trading.  What’s giving them a boost? Well, there were a few surprises in economic news last week…

First of all, housing permits moved higher in June.  The bounce was small, but any bounce is a good bounce…

As dire as the housing market is, this small jump in permits may be signaling a future rebound for housing.  A rebounding housing market gives the economy some stable footing.

This is just what we need for another bull run in commodities.

We also got great news out of earnings reports last week.

Caterpillar (CAT) reported stronger than expected earnings.  And they also raised their full year 2010 earnings guidance.  This is great news for the economy and commodity bulls…

You see, CAT is a bellwether for global construction.  And if CAT sees rising machinery shipments, it means global economies are humming along better than some think.

The news from CAT strengthens the view we’ll sidestep a double-dip recession…

The key is the U.S. economy holding its ground and containing unemployment.  If we hold the line, we’ll see another boost for economically sensitive commodities like industrial metals.

Just remember, many of our positions will require patience for their ultimate potential to be realized.  Stay patient and let the markets decipher all this economic news.  The future is still murky but the commodity markets are holding strong.

Position Updates

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

Same story in a different week for crude… price action remains volatile.

We’re approaching the $80 a barrel mark once again.  This may be the top of the trading range we talked about in our last update.

However, if the recent strength in the equity markets persists, crude may start inching back into the mid-$80s range again.

Good thing we held on to our position in OIL…

Fears of another economic downturn have been moved to the back burner.  And let’s not forget, the oil market is keeping a close eye on the situation with Iran.  Like we said in a recent update, we hope this is resolved peacefully and without incident.

But if it’s not, things will get wild in crude oil…

Regardless of the mixed economic news, we have to hang in there with our position in OIL. The long-term fundamentals are just too bullish.  Hold tight and don’t worry about the short term volatility.

. . . . iShares COMEX Gold Trust (IAU) – HOLD

Gold continues to pull back from record high prices.  Many of the “talking heads” on the business channels say gold prices are doomed to collapse.  Don’t listen to them…

If gold prices were doomed to collapse from record high prices, they would have already done so.  So far the pullback in gold has been nice and orderly.  This is exactly the kind of pullback we expect from gold after running to record highs.

Keep holding IAU, we’ll see gold prices heading higher after this pullback…

. . . . iShares Silver Trust (SLV) – HOLD

Silver is pulling back just like gold.  After the European bank stress test results last week, precious metals should have seen a big bout of selling pressure.

But they didn’t…

And here’s why.  The silver and gold markets don’t believe the results of the test.  In fact, some investors believe the whole stress test is a politicized charade.

For months, gold and silver rallied on European debt worries.  Nobody knew with any certainty if the Euro was going to collapse right along with the European Union (EU). These stress tests, if they were legit, should have put all those worries to rest.

But notice precious metals didn’t sell off on the news.  It makes you wonder if the European debt problems aren’t over yet.

Keep holding our position in SLV for further upside.

. . . . iPath DJ-UBS Sugar (SGG) – HOLD

Our sugar investment is turning out to be a “sweet” one.  Since our entry in early June, sugar (SGG) has been a one-way street higher.  We’re looking at gains of 29%.

What’s causing the price jump?  Well, just like the trade alert said, inventories for sugar remain tight.  And demand is picking up again…

In fact, it’s doing more than picking up.  Demand is so strong for Brazilian sugar that Brazilian shipping ports are backed up.

Sugar exports from Brazil are surging…

There’s pent up demand for sugar.  Sugar dealers didn’t want to buy at 29-year highs early in 2010.  Now that prices have come down, they’re buying up sugar like it’s going out of style.

Remember, our profit target in SGG is $60.

Keep holding our position as sugar prices continue to rebound…

. . . . iPath DJ-UBS Cocoa ETN (NIB)- Buy up to $45.50

Cocoa (NIB) shot higher the day after we recommended it.  Cocoa futures were reacting to a report out of London of a commodities firm taking physical delivery of 240,000 tons of cocoa.

This is bullish news for cocoa and it points to a tight cocoa market…

Thankfully, NIB came back within our buy up to price of $45.50 a couple days later.  I’m sure you’ve already realized cocoa is a rather volatile market.  Just be patient and don’t let the wild moves scare you.

It may be a choppy ride but we expect cocoa to trade higher by the end of 2010…

For now, cocoa trading continues to be range bound.  Make sure you pick up shares of NIB under our buy up to price.

Category: Commodity Trading

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.