Not All Commodities ETFs are in Good Shape

  • Faltering energy commodities are plaguing broader commodities ETFs
  • DBC, which holds a basket of various commodities, is off 4.5% year-to-date
  • Concerns over Chinese oil demand also pressured prices

Thanks to resurgent precious metals exchange traded products, it’s easy to think the broader commodities exchange traded products universe is improving this year. Closer examination indicates some commodities funds and exchange traded notes are still struggling.

The PowerShares DB Commodity Index Tracking Fund (NYSEArca: DBC), which holds a basket of various commodities, is off 4.5% year-to-date. Still faltering energy commodities are plaguing broader commodities ETFs such as DBC because these funds often feature significant tilts to oil or natural gas.

Last month, oil prices retreated after Saudi Oil Minister Ali Al-Naimi ruled out production cuts, arguing that demand will eventually pick up to cover the elevated output, reports Jessica Resnick-Ault for Reuters.

Previously, large oil exporters like Saudi Arabia and Russia have proposed to freeze output near January levels if other countries also followed suit. Oil producers will meet to go over potential freezes in March. However, market observers are skeptical that the cuts will help support oil prices.

Looking at DBC’s chart, “bears have dominated the momentum over the past year. Notice how the nearby trendline and 50-day moving average have influenced the price and have prevented a sustainable move higher. Active traders will likely look to place a short order as close to the trendline to maximize the risk/reward of the trade. Stop-loss orders will likely be placed directly above the 200-day moving average, which is currently trading at $15.03,” according to Investopedia.