One month, oil prices are on a seemingly unstoppable climb. The next, oil’s out and it’s all about agriculture. Commodities are a market of many moving parts operating on their own trend lines. There’s one exchange traded note (ETN) that addresses the issue.
ELEMENTS S&P CTI ETN (NYSEArca: LSC) uses a long/short strategy instead of the long-only exposure provided by more popular broad-base commodity ETFs. Over the last year, LSC has lost 11.1% and it’s down 10.6% year-to-date.
How does it work?
The ETN and the indicator it tracks adjusts its positions on a monthly basis, according to 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 – never short), 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. Depending on the trend, a commodity can be long or short in the fund.
The indicator determines when to be long or short in an individual commodity by using a seven-month moving average, taking only the information from the end of the month. When a commodity is above the average, it’s held long. When it’s below, it’s held short. [ETN Bucks the Downtrend.]