The Caution of Commodities

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  • 08/21/2022

One of the most startling charts I’ve seen in a long time is the DB Commodities Tracking Index Fund (DBC).

This is the widely followed benchmark index of the commodities space, and it includes the metals, grains, oil, soybeans and sugar. The broad-based nature of DBC means it’s a great way to get a handle on global commodity prices.

It’s also a great way to see what global demand looks like.

As you can see, the chart here of DBC looks downright ugly, with the fund now falling to all-time lows. The current price of DBC is way below its 50- and 200-day moving averages, and the route in the sector has actually picked up a lot of steam just since July.

DBC is down nearly 38% during the past 12 months, and there is no doubt that this fund is in a confirmed bear market.

So, why are commodities plunging so much?

The main reason is global demand, which can be translated to a lack of global growth.

While some pockets of the world are seeing economic good times, major commodity consumers such as China are struggling to keep up the pace of growth.

Add to this mix a distinct oversupply of crude oil, or a “global oil glut” as many are calling it, and you get a distinct sense of discomfort about where the economy is headed.

Given this current situation, we are seeing many commodity-related pressures on global equity markets, particularly in the emerging markets. That segment also is in a bear market this year, and that’s a cautionary tale for stocks in the broader international markets and right here at home.

If you want a complete picture of how global markets are being influenced by the commodity plunge, then I strongly encourage you to check out this week’s brief four-minute Weekly ETF Report video.

This video will show you how DBC is at the heart of the current global equity market action. It also will show you that even if you don’t own commodities, your money could be at extreme risk.

Check out my Weekly ETF Report video today.


In This Week’s ETFU Podcast…

I just finished recording, and posting live, the latest edition of the podcast.

In this week’s show, I cover a variety of topics, all of which are crucial to becoming a better ETF investor.

I start off the show with some tips on how to spot a market trend coming a mile away, and how to confirm when that trend has reached critical mass. I also show you how to spot a trend reversal, as well as how to get yourself out of a sector before that reversal closes in on you.

The really big topic in this week’s show is gold and how to view the big meltdown in the yellow metal this year.

The chart here of gold shows us just how tarnished the precious metal has become in 2015.

Gold now trades more than 30% below its 200-day moving average. That is a trend you will not see very often, and it tells us a lot about market components such as group psychology.

In fact, you can’t go anywhere around the financial media without seeing new gold bears pop up to tell you why they think gold is going lower.

Interestingly, with all of the gold haters out there, it may serve you very well down the road to become familiar with the ways you can take advantage of gold when the inevitable tide turns in favor of the yellow metal.

To help you do just that, we’ve updated our Special Report on Gold ETFs.

If you want to really understand what’s going on with gold, and how to spot trend changes in the market, then today’s ETFU Podcast is perfect for you.

Wheels Within Wheels in a Spiral Array

Wheels within wheels
In a spiral array
A pattern so grand
And complex
Time after time
We lose sight of the way
Our causes can’t see
Their effects

— RUSH, “Natural Science”

One of the greatest rock bands ever, RUSH is known for their intricate musicianship as well as the profundity of their lyrics. Here, the band reminds us not to get caught up in our own inner-personal worlds. If we do, we can easily miss out on all of the heavenly glory.

Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow Weekly ETF Report readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Ask Doug.

In case you missed it, I encourage you to read my e-letter column from last week on Eagle Daily Investor about why the market had a weak week. I also invite you to comment in the space provided below my Eagle Daily Investor commentary.



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