Copper started the week with a new year high and brokers are uncertain as to the cause, reports Andrea Hotter for The Wall Street Journal. Market fundamentals aren’t supporting any strong price gains at the moment. Copper did receive a boost yesterday after the factory orders report. (Where’s copper going?)

• iPath DJ AIG Copper TR Sub-Idx ETN (NYSEArca: JJC): up 107.8% year-to-date

The U.S. Commodity Futures Trading Commission Commitments of Traders report revealed that speculative long positions have hit a high last seen in the beginning of 2006, which means downside risk is accumulating, and the current commodities market is still bullish. Experts and analysts are divided as to how prices will pan out.

• iShares S&P GSCI Commodity-Indexed Trust (NYSEArca: GSG): up 10% year-to-date

China is the largest holder of U.S. debt, with around $1 trillion, and experts are urging China to diversify its currency holdings unless the country enjoys watching its dollar holdings depreciate in value, remarks Andrew Snyder for Today’s Finance News. Another option for China is to exchange some dollars for commodity holdings as a better way to hold value – also, better for commodities investors gazing at those price upticks.

• PowerShares DB U.S. Dollar Index Bearish (NYSEArca: UDN): up 7.4% year-to-date

Natural gas inventories are almost topped off  with a little more than 3.7 trillion cubic feet – the total country storage space is 3.9 trillion cubic feet. Snyder believes the natural gas market has ridden the commodities bubble and a correction may soon take place as the spot market corrects for the excess inventory. (How to avoid a bubble).

• United States Natural Gas (NYSEArca: UNG): down 57% year-to-date

Keep in mind that these are just predictions. Watch the markets for what really happens, and act accordingly. When investing in commodities, it’s wise to have an exit strategy that involves a stop-loss points that you can execute when the time comes. (How to protect yourself with a trend-following plan).

For more information on commodities, visit our commodity category.

Max Chen contributed to this article.

Jefferies

The latest funds from Jefferies are based upon the Thompson Reuters/Jefferies CRB-EQ series of indexes. The equity-based funds track the industrial metals and agriculture indexes, explains Ron Rowland for Seeking Alpha.

The ETFs are:

• Jefferies/TR/J  CRB Global Agriculture Index (NYSEArca: CRBA)
• Jefferies/TR/J  CRB Global Industrial Metals Equity Index Fund (NYSEArca: CRBI)
  

CRBA holds equity securities from global universe of listed companies engaged in the production and distribution of agricultural products, including grains, livestock, fertilizers, chemicals, seeds, traits (seed characteristics attained through genetic modification) and equipment. (Another Jefferies Commmodity ETF launched earlier this month).

CRBI offers investors access to shares of companies across the globe engaged in the production and distribution of base/industrial metals and base/industrial metal products, including copper, aluminum, iron ore, steel, nickel and others. (Where copper and steel prices are going).

Both funds come with a 0.65% expense ratio.

These funds will not be affected by regulations expected from the Commodity Futures Trading Commission (CFTC), because they hold equities and not futures. (How regulations could change commodity ETFs).

For more stories about new ETFs, visit our new ETF category.

Coal. China has reduced its supply of coal by clamping down on pollution while demand remains unchanged, which could result in higher prices for the commodity. Now, China will need to import coal to maintain its production and power plants. Coal is the world’s fastest-growing fuel based on consumption. Coal is also a major component in producing steel. (More on coal here).

• Market Vectors Coal ETF (NYSEArca: KOL): up 184.3% since low; up 121.7% year-to-date

Steel. Steel has experienced rising popularity as the global infrastructure sector recovers and automakers increase demand. The Chinese markets and the U.S. dollar weakness has helped prop up the base metals market. (Four ways to play base metals).

• Market Vectors Steel Index ETF Fund (NYSEArca: SLX): up 147.7% since low; up 95.4% year-to-date

Metals & Mining. These funds track indexes made up of the stock of commodity producers. One argument in favor of investing in hard asset equity ETFs is that you may know a little about a particular commodity, but the person running a company involved in mining or producing that commodity is duty-bound to know a whole lot more. Commodity producers can make brilliant business decisions, and they can also benefit when new mines are discovered. They can also cut costs and boost profits. (The benefits of hard assets).

• SPDR S&P Metals & Mining (NYSEArca: XME): up 123.1% since low; up 74.3% year-to-date

Basic Materials. Base metal prices have jumped as demand for the metals increase, more notably from China as the country recovers and hoards metals. Base metals should continue their upward journey as fundamentals in a global recovery strengthen. (More on China’s shopping spree).

• iShares Dow Jones U.S. Basic Materials (NYSEArca: IYM): up 100.9% since low; up 58.5% year-to-date

Copper. Copper prices are at their highest levels in 13 months, thanks to both a drooping dollar and concerns about supply of the metal. Prices have doubled this year, mostly because China stepped up its demand as its economy recovered. Analysts also predict that copper will be the top performer among base metals. (Where copper is going).

• iPath Dow Jones AIG Copper TR Sub Index ETN (NYSEArca: JJC): up 81.3% since low; up 112.7% year-to-date

Commodities have been on a hot streak, but as we’ve learned from recent bubbles, it’s wise to have an exit strategy in the event of a correction. You can read more about strategies here.

For full disclosure, Tom Lydon’s clients own shares of IYM.

Max Chen contributed to this article.

The current supply of copper looks like it may be dropping and steel producers may be flooding the market.

Copper prices jumped more than 3%, hitting a 13-month high on Wednesday, and BHP Billiton (NYSE: BHP) declared force majeure at the fourth-largest copper mine in the world, reinforcing supply concerns, writes Barani Krishnan and Rebekah Curtis for Reuters. Copper, along with other commodities, rallied as the dollar dipped.

Copper futures for the December delivery finished at $3.0360 per pound on the New York Mercantile Exchange -  the last time copper hovered around $3 dollars was in September 2008. (For more information on copper, visit our copper category.)

China Steel, Taiwan’s foremost steel producer, will reduce its domestic price by 4.5% in December, indicating that steel prices could be bottoming out. The company expects steel outlook to improve in 2010 as world economies recover, reports Ken Wills for Reuters.

Analysts are not surprised by pullbacks in the benchmark hot-rolled sheet in coil (HRC) steel price as a result of weak end-use demand, comments Tom Stundza for Purchasing. Production has increased to almost 62% of capacity despite August U.S. steel mill shipments being down 37% from last year.

In a survey of steel buyers, 77% of participants think current inventory levels are sufficient for one or two months and 76% don’t plan on increasing steel orders. Over the next month, 24% expect incoming orders to decline, and 46% expect incoming orders to decline in the next three months. (For more information on steel, visit our steel category.)

Fore more information on industrial metals, visit our industrial metals category.

• iPath DJ AIG Copper TR Sub-Idx ETN (NYSEArca: JJC): up 112.7% year-to-date

• Market Vectors Steel ETF (NYSEArca: SLX): up 96.6% year-to-date

• iShares MSCI Chile Investable Mkt Idx (NYSEArca: ECH): up 67.4% year-to-date; materials constitutes 20.7%, including mining companies

Max Chen contributed to this article.

Copper prices are at their highest levels in six weeks, thanks to both a drooping dollar and concerns about supply of the metal. Anna Stablum for Bloomberg reports that copper prices have doubled this year, mostly because China stepped up its demand as its economy recovered. Investors are now speculating that demand for copper will only increase. (Read more about how copper is used here).

Meanwhile, incidents in Chile and Australia are leading to supply worries. In Chile, the BHP mines are facing a potential walkout/strike as employees are not happy with recent contract offerings. Around 20% of copper mine output is at stake. In Australia, an investigation into an accident at a mine forced the closing of the main hauling shaft.

• iPath Dow Jones AIG Copper TR Sub Index ETN (NYSEArca: JJC): up 95.7% year-to-date

Steel also has experienced rising popularity as the global infrastructure sector recovers and automakers increase demand. Sahil Mahtini and Prasenjit Bhattacharya for The Wall Street Journal report that the Steel Authority of India Ltd., India’s largest steelmaker by local capacity, expects India’s steel consumption to rise 5%-6% in the calendar year 2009, while production is expected to rise 4%-5%.

India’s leading steel companies raised prices of flat products for the second month in a row in September because of demand from automakers and a recovery in global prices.

Meanwhile, the U.S. Commerce Department launched an investigation Wednesday into whether to impose anti-dumping and duties on imports of certain steel pipes from China. Tom Barkley for The Wall Street Journal reports that trade disputes are rising as the global economy moves into recovery mode. Producers are searching for different markets to unload excess inventory.

• Market Vectors Steel (NYSEArca: SLX): up 81.6% year-to-date

For more stories about base metals, visit our base metals category.

China’s cabinet is no longer approving new projects for energy-intensive aluminum production for three years. Chuin-Wei Yap and Juan Chen and Yue Li for Dow Jones Newswires report that the State Council, also issued new rules to contain excessive capacity in seven other sectors, including revisiting a years-long campaign to curb steel output.

The ban on new aluminum capacity, a popular metal, is primarily meant to rein in the energy-guzzling and hard-to-control industry. The markets have so far shrugged off the news.

The Chinese markets and the U.S. dollar weakness has helped prop the base metals market up, and the underlying demand is strong indicator that emerging markets have some resilience to the economic downturn, says Dorothy Kosich for MineWeb.

One analyst notes that base metals prices have hit “mid-cycle” levels, something that normally takes years after a global downturn. The analyst also predicts that copper will be the top performer among base metals, and forecasts China’s consumption to grow 20% this year.

Some related ETFs and exchange traded notes (ETNs):

• iPath Dow Jones AIG Copper TR Sub-Index ETN (NYSEArca: JJC): up 91.2% year-to-date

• iPath Dow Jones AIG Lead TR Sub-Index ETN (NYSEArca: LD): up 119.3% year-to-date

• Market Vectors Steel ETF (SLX): up 80% year-to-date

For more stories about base metals, visit our base metals category.

Strong employment reports, renewed auto and housing demand and signs of a recovery in China have helped spur the base metals’ strong run, says Sara Jane Tasker for The Australian. The rebound has been so strong that analysts expect it to continue for the rest of 2009.

Some other points:

• According to Citigroup, copper has led the base metal recovery, up $600 in recent trading. So far this year, it has gained 100%.
• Aluminum has climbed around 30% despite its London Metal Exchange inventories remaining at record levels, says Michael Taylor for Reuters.
• Base metals should continue their upward journey as fundamentals in a global recovery strengthen and the demand from China remains healthy.
• China is expected to account for 38% of the world’s copper demand by 2014, up from 28% in 2008.

• SPDR Metals & Mining (XME): up 53.7% year-to-date; holds companies involved in the metals and mining industries

• iShares Dow Jones U.S. Basic Materials (IYM): up 40.7% year-to-date; composed of companies involved in the production of basic materials

• Market Vectors Steel (SLX): up 66.5% year-to-date; pure exposure to steel companies

• PowerShares DB Base Metals (DBB): up 55.4% year-to-date; holds futures contracts for aluminum, copper and zinc

For more stories about base metals, visit our base metals category.

James Campbell of The Wall Street Journal reports that China’s State Reserve Board holds at least 235,000 metric tons of copper, nearly as much as the London Metal Exchange warehouses hold to back futures trading. The nation as a whole holds nearly one million tons of copper in total, the amount equivalent to a month’s global consumption.

Many feel that China can’t possibly keep stockpiling and driving up the price of copper.  After all, an official from China’s National Development and Reform Commission last month said that stockpiling has come to a halt. So does this mean that copper will lose its luster?

(Graphic courtesy of The Wall Street Journal)

On the other hand, copper is still relatively cheap and China may continue to keep stockpiling despite what reports have indicated. Additionally, the demand for the bronze-colored metal may be further boosted in the nation as a result of investment in power-generation capacity, a recovering construction industry and surging car sales.

• iPath DJ-AIG Copper Total Return Sub-IndexSM ETN (JJC): up 69.3% year-to-date and trading above its 200-day moving average.

• iShares MSCI Chile Index Fund (ECH): up 59.7% year-to-date and trading above its 200-day moving average; Chile is the world’s largest exporter of copper.

For more stories on copper, visit our copper category.

Kevin Grewal contributed to this article.

Note that this isn’t a complete list of all funds that were down sharply in 2008 only to be up this year – these are just a few that have caught our eyes.

Brazil is one country that is enjoying the inundation of assets flowing into emerging markets. The country fared rather well during the financial crisis and could be on a path for more growth as its abundance of natural resources provides for an ever-growing trade surplus. Many also expect that Brazil may be one of the few countries that will be leading the path to recovery.

• iShares MSCI Brazil Index (EWZ): down 56.6% in 2008; up 41.8% in 2009

As the world resumes normal growth, metals, especially copper, will be needed in wiring and plumbing. China is an example of how one country’s voracious need for copper may drive up the metal’s prices. (Note that this is an ETN, which differ from ETFs in some key ways).

• iPath DJ AIG Copper TR Sub-Idx ETN (JJC): down 54.5% in 2008; up 56.5% in 2009

Some areas are bound to outpace others and one way to capitalize on this is said to be through agriculture. Emerging markets that further develop will need the sustenance for their growing populations and farms aren’t non-profit enterprises. Producers of these economies are in a position to potentially benefit, too.

• Market Vectors Agribusiness ETF (MOO): down 51.5% in 2008; up 18.7% in 2009

The retail sector is gaining momentum with a strong emphasis on value. Consumers are out and consuming again, although in different ways – they’re focusing on home entertainment and cheap deals where they can get them. The advertising game is also in full gear, trying to lure in consumers to go along with value ad cheap prices. Some retail stocks are above their long-term trend prices.

• SPDR S&P Retail (XRT): down 39.3% in 2008; up 31% in 2009

The technology sector has seen some increased competitiveness among industry giants. More investments are also pouring into the sector as more people are caught up in the venture capital game. Some believe that this sector has posted gains because of its ability to remain innovative, keep consumers on their toes and have overall financial strength.

• iShares Dow Jones U.S. Technology (IYW): down 43.4% in 2008; up 20.8% in 2009

Max Chen contributed to this article.

Some commodities have performed a bit better than others in recent months.  Now that inflation fears have been put on the back burner by the Federal Reserve, will the commodities that outperformed this year resume their uptrends anytime soon, or simply hold steady for the time being? No one knows, so watch the trend lines for signals.

If the prices continue to decline from this point, have an exit strategy in place to protect yourself. We watch for positions to decline 8% off their recent high or below their 200-day moving average.

TraderMark has identified the ten hottest commodities for the year and their corresponding ETFs (although in some cases, be aware that there’s more than one way to play these commodities). Be sure to understand which commodities hold what – some hold physical commodities, some hold futures and others hold the stock of companies involved in their production.

• Unleaded Gas, represented by the United States Gasoline Fund (UGA), up 68.3% year-to-date.
• Copper, which can be accessed through the PowerShares DB Base Metals Fund (DBB), 32.3% year-to-date
• Crude Oil, represented by the PowerShares Dynamic Oil Services (PXJ), up 23.2% year-to-date
• Orange Juice, which can be exposed through the Market Vectors Agribusiness (MOO), up 24.5% year-to-date
• Silver, which is represented by the iShares Silver Trust (SLV), up 23.3% year-to-date
• Sugar, which is seen in the  iPath DJ AIG Sugar (SGG) up 32% year-to-date
• Coffee which can be accessed through the iPath DJ AIG Coffee (JO), up 6.4% year-to-date
• Soybeans, which comprises 25% of the assets of the  PowerShares DB Agriculture (DBA) is down 0.4% year-to-date; exposure to both corn and wheat, two of the nation’s largest commodities can be accessed through DBA as well
• Heating Oil, which can be exposed through the United States Heating Oil Fund (UHN), up 22.2% year-to-date
• Nickel, which is represented through the iPath DJ AIG Nikel (JJN) up 31.5% year-to-date.

For more stories on commodities, visit our commodities category.

Kevin Grewal contributed to this article.