Commodity ETF Alert November 2014 Issue
Commodity Outlook: All Commodities
Folks, there’s no way to sugar coat it. Commodity performance has been absolutely abysmal in the second half of 2014. Gold, silver, oil- they’ve all been taken to the woodshed the past few months.
What gives?
Look no further than the soaring US Dollar…
As you can see, there’s been nothing but strength for the currency since July. The rally kicked off when investors learned of the Federal Reserve’s plan to end quantitative easing (QE) by the end of 2014.
As you may know, the Fed ended their stimulus program a few weeks ago- much earlier than many analysts (including myself) expected.
And that’s not all…
A sudden and unexpected bout of weakness in the Eurozone economy forced the European Central Bank (ECB) to venture into their own QE program recently. With the ECB firing up the printing presses at the same time the Fed shut theirs down, the Dollar had even more reasons to rally.
It’s abundantly clear that currency movements are having a huge effect on commodities right now.
But take a look at this…
This long-term US Dollar Index chart reveals the Greenback has rallied to extremely important technical resistance (red line).
From here the options are quite simple…
If the Dollar breaks above this resistance zone, commodities will face continued tough sledding in the months ahead.
But if it breaks lower, buyers are going to rush back into the commodity space in force.
So here’s what I suggest we do…
Now’s the perfect time to make a low-risk contrarian bet on the entire commodity space. Instead of picking just one commodity to rally if the Dollar turns lower, let’s bet on them all.
The easiest way to do that is with the Powershares DB Commodity Index Tracking Fund (DBC). DBC not only holds heavily traded assets like gold, silver, WTI, and Brent crude- it also contains smaller commodities like zinc and aluminum.
The key to this contrarian trade is we’re risking very little.
If the Dollar breaks above the red line in the chart above, we’ll close our DBC trade for a very small loss. But if the greenback succumbs to an extended bout of weakness, we’ll be sitting pretty as 2014 draws to a close!
Go ahead and buy the Powershares DB Commodity Index Tracking Fund (DBC) at any price under $21.85!
Let’s look at a chart…
Technically Speaking:
As you can see, DBC has slid dramatically lower since July. But with the Dollar at a very important pivot point, now’s the perfect time to grab DBC out of the bargain bin!
WHAT TO DO NOW:
Powershares DB Commodity Index Tracking Fund (DBC) is trading at $21.64
Buy DBC up to $21.85 per share
Our profit target is $24.00 or more
Risk Control Price is $21.20
Category: Commodity Trading
