As of March 20, Claymore Advisors has decided to file to turn an exchange traded note into an ETF format. The commodity-focused ETN is the ELEMENTS S&P CTI ETN (LSC) which launched in June 2008, just before the major correction commodities.
The ETN is somewhat new, however, the indicator is not.
The underlying index is constructed in such a way that it reflects current trends in commodities. This allows commodities to be either long or short (except the energy sector which is long or flat but never short). Rather than going down with a sinking ship, the indicator can adjust its positions on a monthly basis, depending on how the individual commodities are trending at month’s end.
The indicator goes both long and short in six areas: energy (long or flat only), softs, grain, livestock, industrial metals and precious metals. Using a seven-month weighted moving average, the indicator then determines in what areas it will be long and where it will be short.
The indicator determines when to be long or short in an individual commodity by using a 7-month moving average, taking only the information from the end of the month. As illustrated in the chart above, when a commodity is above the average, it’s held long. When it’s below, it’s held short.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.