I was thinking of diversifying my commodities holdings, which are basically in energy and gold.  (An aside - I have some steel, but I was thinking that it is better considered "infrastructure" than "commodity."  Am I all wet?)

I was looking at selling my GLD (I have miner funds) to buy some DBC.  When I look at the charts, DBC appears to be trading in the upper part of a rising trading channel.  Should I wait for a correction?  GLD seems to be consolidating after a correction... setting up for a buy on a breakout up... or sell if it breaks down.  In other words, it doesn't seem like a good time to make this change based on the charts.  What do you think?  Maybe, I'm thinking too hard and spinning my wheels.  Should I just make the exchange, because DBC is soaring and GLD is not?

Is there a better choice than DBC?

Thanks!

erryl

Picking up on your hypothesis, is this an argument for getting out of the market completely, shorting the market heavily or constructing a highly diversified portfolio to weather the storm?

Here is one link that will help.  http://www.trade2win.com/traderpedia/Measured_move 

Searching the site should give you some more info.  If you plug Elliot Wave theory into a search engine and read whatever looks good you will come across more info on the measured move. 

I am sticking with my overweight precious metals and underweight commodities for a while.  Both of them seem to be in a state of flux, but I currently believe that precious metals are a better idea until the USD proves it has some strength.  If the USD drops more than a point in the next week or two, precious metals will be the place to be.  I am not so sure that commodities will perform as well going forward. 

uh

"Picking up on your hypothesis, is this an argument for getting out of the market completely, shorting the market heavily or constructing a highly diversified portfolio to weather the storm?"

The choice is up to the individual investor and will be somewhat different for each one depending on their goals, risk tolerance, etc.  The important point is that the broader segments of this market should continue to degrade for another year.   Bargain hunting is probably not the best idea right now, but might be smart in one more year.  Capital preservation is probably a good strategy, but how one goes about it will vary with each individual. 

uh

UH -- Interesting start.

A couple of things struck me this weekend that are worth passing on.

Friday's selling did not have the characteristics one looks for in a capitulation and although the market is somewhat oversold in a Bear market it can get more so quickly. In short dip buyers beware. Bear Market Rules are in force.

"Hard to See the Darkside Is" -- The gramatically challenged Yoda.

The M* Valuation Indicator has been signaling that the market is significantly undervalued for about a year with levels approaching those of the last Bear. M* But that indicator is useless as even an intermediate term timing tool and is often referred to as a "Valuation Trap".

I noticed something unusual about my portfolio this weekend. The PEG for my entire long equity portion of my portfolio is below 1 for the first time I can ever remember. PEG is calculated by taking the P/E and dividing it by the Projected Earnings Growth. A PEG ratio of 1 represents a presumed very fair trade-off between the values of cost and the values of growth, indicating that a stock is reasonably valued given the expected growth. Similar to PE ratios, a lower PEG means that the stock is undervalued more. Indeed one can even find PEGs today for some investments approaching .5.

"So ...How Can This Be?" -- St. Alia of the Knife

So where are the value investors? The answer appears to be the value investors may be out of or low on cash. Mutual Fund Cash Balances for 10 years have been at historically low levels compared to the levels of past decades. MFCash At the same time individual investors have records amounts of money in MM Funds -- in short most of us are more prone to time the market perhaps. A lot of small investors left the game in the 2000 Bear and have not returned.

In truth the fundamental nature of the market has become increasingly more hostile to small investors. Remember the good old stodgy Dow Jones Industrials -- the sanctuary of widows and orphans; the ultimate refuge of Buy and Hold Investors? Look at this study. HERE Not a single Dow stock has an average holding period that even approaches one year. The entire float of most Dow stocks turns over completely about every 6 months. GM turns completely over every 25 days --in short the average share is held only 25 days; Apple and Yahoo about the same. Thus hot money driven by computers is determining daily and short term price movements not long term investors any more.

Or As My Computer Says to me repeatedly"Computers Rule!"

So here I sit this rainy weekend with my computer trying to partially outgame the Bad Guys' Computers -- which only works because their computers are programmed to obey T/A rules too. Because they are Rule Based there is hope we can compete -- at least my computer says so but "only if I quit moping and get back to work." :-) So for now I sit huddled behind my hedges this weekend waiting for a better day when long term investing once again works reliably. I  hope my computer can hold onto my small YTD gain in my portfolio.

On the short-term perspective all of my hedges worked as designed this week and almost totally offset my long losses for the week -- if Energy hadn't stalled out prior to the Jedda meeting I would have been in the Green. But my hedges are concentrated in a few positions and there is little margin for error.

"Never Have so Many Owed So Much to So Few" -- Winston Churchill.

erryl:

Should I just make the exchange, because DBC is soaring and GLD is not?

First off, DBC is heavily weighted toward energy (>50%).  You have to decide if you're comfortable with that.  

If you believe oil is going to continue it's climb, then buy on the dips.  You'll essentially be buying a momo play.  Those require a bit of baby-sitting...

If you believe oil is going to tank, wait for a correction.  

Charts are great, but you have to have a  "belief" of what's going to happen before buying in.  Otherwise, just stick to the things with less uncertainty.  

OR, if you're just buying because ii's an asset class you want to add, don't worry too much about the timing except to buy on a dip.  And save some dry power for some bonafide corrections. 

I haven't looked at a chart while writing this, since I think getting clear in your head WHY you're buying is more important.  THEN, use the charts to time your entry. 

As for anything better, I've always traded DBC and have been happy with it.  But at one point I looked at some other ETFs.  I don't remember the details except I think one of the better ones, diversity-wise, was an ETN.  And I don't like ETNs due to their credit risk situation.  So I've always just stuck with DBC.

uncleharley:

"Picking up on your hypothesis, is this an argument for getting out of the market completely, shorting the market heavily or constructing a highly diversified portfolio to weather the storm?"

The choice is up to the individual investor and will be somewhat different for each one depending on their goals, risk tolerance, etc. 

uh

I go for the highly diversified portfolio, look for weakness in the storm, and Keep my head out of the clouds...

Yes, we as investors are all different,  this is a good thing otherwise we'd all be getting the returns.

Since the market is controlled by computers, they are quicker than my fat fingers, I'll never win on a day that has violent swings.  Trying to time things doesn't work.  You'll lose more by being on the sidelines than being in the market, based on studies.

The analysis works until the new paradigm comes along, there are winner/ losers, paradigm shift, then move on.  I feel we are in the paradigm shift stage, as El-Erian said, it used to be a large US Jet carring most of the load,  now it is a number of regional carriers (non US) that dominate the airways.

There is always a bull market somewhere,  the trick is finding it...

Hi Erryl,  the best article I've  seen for comparing various ETFs, ETNs,  and commodity mutual funds is on the Seeking Alpha web site.  It's called " Commodity ETF Overveiw" by Tim Iacono.    Sorry I don't know how to link but they have a search box.  Just remember when looking at their returns that the Pimco funds gets the return of the commodities plus the return from the underlying TIPs bonds that are used as collateral.

Dan.