Commodity ETF Alert Yearly Performance Review

| December 19, 2014

Yearly Performance Review- And What’s In Store For 2015!

I don’t know about you, but I find it hard to believe 2014 is drawing to a close.

It seems like yesterday this year was just getting started!

With 2015 just around the corner, we’re stepping away from our normal monthly schedule.

Instead of issuing a new commodity trade for December, I’m providing a yearly performance review.

Let me explain why…  

The US Dollar is still in a very strong uptrend. As you know, the surging currency has wreaked havoc on the entire commodity space since July.

In fact, the greenback’s unrelenting rise stopped us out of our trade in the Powershares DB Commodity Index Tracking Fund (DBC) from last month.

Due to the seemingly unstoppable Dollar rally, there’s simply no reason to initiate a new commodity trade right now.

Folks, the best trade this month is no trade at all! 

Let’s keep our powder dry until a premium commodity trading opportunity arises. When it does, you’ll be the first to know.

Now, let’s do a quick recap of 2014…

As you know, it was a rough year in the commodity space. The surging US Dollar pushed most hard assets right off a cliff in the latter half of the year.

One look at the CRB index tells the story…

CRB index

As you can see, the commodity-focused index had a good start to the year with gains of just over 10% by late June.

But once July rolled around, bears took control of the market!

In fact, over the past six months, only five commodities are showing positive performance- wheat (+9%), lumber (+8%), live cattle (+6%), feeder cattle (+6%), and coffee (+2%).

Every other commodity is down since July. And in some cases, the downturn is incredible. For example, WTI crude is down a mind-boggling 47%. Soybeans plummeted 24%. Silver is off by 20%. The list goes on and on.

With that said, we were still able to collect commodity profits this year… 

In January, we purchased the iPath Pure Beta Coffee (CAFE) when news spread of a Brazilian drought affecting coffee trees.   A few months later, we closed the trade for a whopping 45% gain.   No doubt about it, it was a great way to start the year.

But then things took a turn for the worse…

Despite the fundamental long-term value in gold and silver, the metals couldn’t withstand the US Dollar’s onslaught. As a result, we closed our positions in IAU and SLV for a loss a few weeks ago. Of course, there were other positions in our commodity ETF portfolio suffering the same fate.

What can we do to make Commodity ETF Alert performance better going forward?

It’s abundantly clear we need to adapt to changing commodity market conditions.   Gone are the days of buying an undervalued hard asset and watching it trade higher over time.

We need to be more nimble.

So here’s what we’re going to do…

First, we’ll be adhering to a strict stop-loss criterion. If a trade goes against us by 10%, we’ll cut the position- no matter what. What’s more, we’ll be trailing our stop loss level higher once the commodity trades in our intended direction.

Secondly, instead of just focusing on commodity ETFs, we’re expanding our coverage universe to ETFs holding commodity-producing stocks!

For example, there are many times when a profit opportunity arises in gold stocks even though the commodity they mine is stuck in the mud. The same goes for oil and gas producing stocks.

Making this important change will allow us greater flexibility and increased profit opportunity.

Be on the lookout for a trade in commodity producing stock ETFs soon!

To sum it up…

There’s no question it was a rough year for commodities. But I have no doubt the changes we’re implementing in 2015 will make the Commodity ETF Alert as profitable as ever!

We thank you for your subscription and look forward to a prosperous 2015!


Commodity Review

Commodity Ticker Current Value Last Month Change
Energy JJE $11.37 $15.06 -24.5%
Grains JJG $40.79 $37.52 +8.7%
Industrial Metals JJM $27.58 $29.63 -6.9%
Precious Metals JJP $56.55 $57.00 -0.8%
Softs JJS $39.68 $42.91 -7.5%
Livestock COW $29.72 $32.24 -7.8%
ALL COMMODITIES DJP $31.30 $33.89 -7.6%
As of 12/18/14

Energy Commodities

There just doesn’t seem to be a bottom in the oil market. West Texas Intermediate (WTI) crude is trading at an astonishing $55 a barrel. Barring the 2008 financial crisis, I’ve never seen such an unrelenting downdraft in this commodity.

In the past, when the price of oil got too low, OPEC would prop up prices by cutting production. Much to my surprise, the Middle Eastern oil cartel avoided production cuts at their late November meeting.

Since OPEC is no longer the global price setter in the oil market, there’s really no telling how low crude can go before the market finds equilibrium. This is the first time oil has traded solely on market forces in decades!

At some point, the bullish opportunity in oil will be outstanding. But first, we need to see signs of a tradable bottom in the market.

What about natural gas?

After a cold November, Old Man Winter completely disappeared in December. US temperatures have been above normal for the past three weeks. As a result, the price of natural gas is back at 52-week lows near $3.60 mmBtu.

But here’s the deal…

US natural gas storage levels are currently sitting 7.3% below the 5-year average. What’s more, temperatures are expected to drop in line with seasonal norms over the next two weeks.

As a result, we’re likely close to a short-term bottom in natural gas. Let’s move our position in the US Natural Gas Fund (UNG) back to a BUY! If you haven’t already, you can purchase UNG at any price up to $19.50.

Grain Commodities

Our position in the Teucrium Commodity Trust Corn Fund (CORN) is turning into a very nice winner. CORN is currently trading at $27.50, which is a 14% gain from our entry point at $23.70.

Let’s keep holding CORN for our profit target at $30.00!

Industrial Metals 

Unfortunately, copper dropped firmly below $3.00 a pound in late November. As a result, our position in the iPath DJ-UBS Copper (JJC) hit our stop loss order at $35.80 on November 26th.

We’ll need to see a considerable pick up in Chinese economic strength before we can buy into the copper market again.

Precious Metals

There’s been nothing but choppy, sideways trading action in gold, silver, platinum, and palladium for months now. As I mentioned in last month’s update, we need the US Dollar to turn lower and/or see a hot inflation reading before we can consider trading the long side of precious metals again.


After a bullish run to $2.20 a pound in early October, investors have done nothing but push coffee to lower ground. Unfortunately, the recent downturn sent our position in the iPath Pure Beta Coffee (CAFE) below our $21.50 stop loss on December 11th.

Despite the recent downturn, this is one commodity we’ll be watching closely for another long opportunity in early 2015. 


For the first time in months, feeder cattle succumbed to heavy selling in back to back trading sessions. In fact, the commodity traded limit down 4 out of the past 5 trading sessions. The recent selloff has feeders trading at $2.20 a pound, which is the lowest price since early September!

*** Editor’s Note*** Due to the upcoming holidays, this is the last time you’ll hear from me in 2014. Be on the lookout for a new commodity ETF trading opportunity in early January 2015!


Category: Commodity Trading