Commodity ETFs Overbought; Gold Least So

Below we highlight our list of commodity ETFs.  As shown, all of the ETFs are currently well above their 50-day moving averages and up over the last five days.  The ETFs become overbought when they move more than one standard deviation above their 50-day moving averages. 

DBA, an agriculture ETF, is currently the most overbought at 10.09% above the top of its historical trading range.  DBA is followed by the silver ETFs (SLV and DBS) and natural gas (UNG).  While these ETFs are in strong uptrends, their current price levels suggest that a short-term pullback is probably in the cards.

click to enlarge

Comments

[HarMegiddo:]

wow, another SA article saying the DBA is overbought. i have been reading about that since the middle of January. 2 out of every 3 articles says so. huh? and it continues to go up.
they need to also say that these "overbought/oversold" discrepancies can be cleared up in days.
I think they try to knock it down a little, so they can get a better entry point.

2008 Feb 27 08:03 AM

[HarMegiddo:]

if you want to talk about something hitting resistance, let's talk about the S&P. Its coming right back up near its 500day MA. If it breaks, i will be EXTREMELY surprised.

2008 Feb 27 08:07 AM

[jp4LSU:]

I've had DBA since late November and it has been great. I'm wondering is it ever warranted for the ETF to appear overbought but it actually isn't. If the market warrants the price of the stock and with ag products and food steadily going up and food supplies on a thin margin, is it possible the deviation from the 50day avg is warranted?

I actually sold over half of my DBA shares yesterday to spread around in the ag market, but it has made me some money.

2008 Feb 27 08:15 AM

[haydete:]

I appreciate the statistics, but "Overbought" shouldn't be advice, but an adjective. Driving "too fast" is not a guarantee of a ticket or an accident, it simply increases the risk somewhat... maybe.

2008 Feb 27 08:20 AM

[Gunslinger:]

Stop with these group's "articles" please! These are nothing but 2 second stats with no meaning, to fit their own agenda... (where is the disclosure?). And they are using their own definition of "overbought" to try yet another time to bring these down.

2008 Feb 27 08:28 AM

[Chuck:]

I tend to drive about 10 mph faster than the speed limit around 25 - 45, and about 20 mph faster above 55 mph on the major highways.
If I get a 'ding' speeding ticket once every 3 years, say even $200 fine, it ends up costing me only 20 cents per day.

Until I'm approaching 65 years old, then I'll slow down a bit. Like investing, go moderate risk in the early years, and as you near retirement/ssn then move slower and put more money into P&G and Pepsi.

2008 Feb 27 09:42 AM

[Terry Finn:]

"Overbought" is just a way of saying something was under priced in the past and that I wasn't smart enough to recognize this under valuation until it was too late. In other words, "I missed the boat".

2008 Feb 27 09:43 AM

[just.a.guy:]

Why not write the real story? That this is a leading indicator of much higher inflation to come (if it isn't already here), and probably a lower dollar as well. Commodities ETFs are telling you a lot more than just their price. Listen.

2008 Feb 27 11:33 AM

[User 86999:]

Even the numbers are getting all mixed up. Throwing in standard deviation and percentages together doesn't make sense. On a bell curve, the relationship between the two is well known but requires a lookup to make sense of the relationship. The difference between 2% overbought and 10% overbought may not be statistically significant on the curve. What a waste of time!

2008 Feb 27 12:04 PM

[Metzenbaum ...:]

And I say, also, enough with the std deviations. Sorry to say, Bespoke, you are far from the standards of insight expected on Alpha. headlines, you are good at; analysis, not so much.

2008 Feb 27 01:51 PM

[Gunslinger:]

Where did all the comments from this morning go? Or was that article erased and reposted?

2008 Feb 27 03:30 PM

[fmontyr:]

Apparently the author of this article does not understand the basic concept of an ETF. DBA has as its investment object, "The Fund is designed to track the Deutsche Bank Liquid Commodity Index Optimum Yield Optimum Yield Agriculture Excess Return which is intended to reflect the agricultural sector. The Index Commodities consist of Corn, Wheat, Soybeans and Sugar." How can DBA be overbought if its underlying commodities are being played up in the commodities markets as a reflection of both supply and speculative factors? This article is bunk! Go tell the traders in commodities to stop doing what they are doing because they are driving DBA to be overbought. Ha!

2008 Feb 28 12:14 AM

[fmontyr:]

Furthermore, the author must realize that ETF's are simply tracking vehicles. SLV & DBS do not control all the silver in the world, only a small percentage. Other factors are driving the silver price and hence the silver ETF's reflects that. UNG makes no attempt to own natural gas, it only reflects the Port Henry hub price. The price of natural gas is set by supply and demand factors and UNG has nothing to do with setting the price for natural gas. The author has applied methodology used by market technicians for individual company stocks in an entirely wrongful manner.

2008 Feb 28 12:34 AM

[User 151033:]

This last commentator has it right. Ironically, perhaps, in terms of technical overbought indicators, only spot gold has really been somewhat overbought.

2008 Feb 28 01:15 AM

[couldashoulda:]

"short term pullback" is not necessary to adjust "overbought" as defined by the author. If the stock simply slows the speed of acceleration (continues to increase at a slower level), it will eventually not be overbought statistically.

2008 Feb 28 05:53 AM

[bullbearmar...:]

Those charts, moving averages, overbought/oversold mean nothing.
I have been trading for over 15 years and the only thing you need to know
is where the interest is going.
I have been hearing and reading since oil was at 60 and gold was at 800 that they are way overbought.
As both went to all time highs.
Both will correct on a short term basis but they will both go higher every year forever.

2008 Feb 28 10:05 AM