As September Approaches, Commodity ETFs Appear Less Vulnerable

by: Gary Gordon

Permabears love to talk about a “lack of conviction” on the part of the share purchasing public. Specifically, when upward momentum in stocks occurs on “low volume,” they dismiss the price movement outright.

On Monday, 8/30/10, Dow stocks experienced a triple-digit pullback. Meanwhile, the S&P 500 and the NASDAQ both gave up more than 1.5%. However, with the trading session sporting the lowest volume of share trading in all of 2010, how meaningful was the slide?

Ironically, the “permanently bearish” still harped on the slow growth of personal income. Meanwhile, they dismissed the fastest pace of consumption in 4 months and cast aside the enormous level of merger activity. And they made no mention of the inconsequential number of shares changing hands.

Why aren’t the permabears acknowledging that a light volume down move is no more ”telling” than a light volume up move? In truth, they’re permanently tied to any fact, figure or distorted representation that could possibly help their negative narrative.

Rather than be bearish, bullish or biased… it may be better to assess which areas have been the most skittish in response to recent economic uncertainty. It follows that… should the economic uncertainty continue… there’s a high probaiblity the same areas would experience skittishness into September and October.

On the flip side, some areas and asset classes haven’t been as affected by the consistent drumbeat of negativity. Consumer staples stocks have help up reasonably well. Even more noticeable, the majority of commodity ETFs have been surprisingly sanguine. (Note: If copper prices remain robust, wouldn’t that suggest a reasonable level of world economic growth… even if most of it comes from emerging market demand?)

5-Day And 1-Day Rolling Returns For Key Commodity ETFs
Approx 5-Day % Approx 1-Day %
iPath DJ AIG Copper (NYSEARCA:JJC) 3.2% 0.35%
iPAth DJ AIG Industrial Metals (NYSEARCA:JJM) 2.4% 0.79%
iPath DJ AIG Crude Oil (NYSEARCA:OIL) 2.0% -1.65%
iPath S&P Total Commodity (NYSEARCA:GSP) 1.6% -0.39%
iPath DJ AIG Total Commodity (NYSEARCA:DJP) 0.8% 0.30%
5-Day And 1-Day Rolling Returns For Key U.S. Stock ETFs
iShares Technology (NYSEARCA:IGM) -2.1% -1.31%
SPDR Retail (NYSEARCA:XRT) -2.7% -2.52%
iShares Semiconductors (IGW) -2.7% -2.70%
iShares DJ Financial Servicves (NYSEARCA:IYG) -3.2% -2.44%
SPDR KBW Bank (NYSEARCA:KBE) -3.4% -2.37%

Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.