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danielosborne
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I am an investment professional currently working for the amazing Wall Street Bad Boys.
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NextCandle.com
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  • Commodity Review: Is A Perfect Storm Brewing With French And Greek Elections Plus US And Upcoming China Data? 0 comments
    May 9, 2012 11:52 AM | about stocks: CMD, SCO, KOLD, GLL, ZSL

    In more bad signs for the global economy and commodities, the people of France and Greece have spoken with the French handing power to the Socialists and the Greeks effectively handing power to no-one while data coming out of the US grows increasingly gloomy with China set to release more data later this week.

    Specifically and in France, Francois Hollande was elected France's first Socialist president in 17 years, putting the country on a collision course with Germany over deficit spending while in Greek elections on Sunday, no party won anything close to a majority - meaning another precarious coalition government will need to be formed. Complicating matters is the fact that the Communists and far-right parties also picked up sizable albeit single digit percentages of the vote.

    Meanwhile, much of the data coming out of the US has been weak over the past few weeks (see our summaries for last week here and for the week before last here) - culminating in another lackluster (to put it kindly) jobs report last Friday.

    Finally, trade and output data in China is due out on Friday and should this data show a slowdown in the world's No. 2 economy, it could be the final nail in the coffin for the global economy and for commodities in particular. On the other hand, its been reported that there is new evidence that the Chinese economy has bottomed out and is now with inflation falling and output strengthening - according to a Reuters survey of "experts."

    Either way, negative data out of China will mean the perfect bearish storm and investors in early Monday trading appear to be already heading for the exits when it comes to risky or commodity based assets with the Aussie dollar falling, oil hitting multi-month lows and other commodities (like copper) also sliding while gold has largely held up.

    Hence and for investors and traders alike who are not interested in shorting futures or options contracts or shorting commodity stocks, the next best alternative to profit from falling commodity prices would be to invest in funds that short commodities on your behalf. ProShares bills itself as the world's largest provider of leveraged and inverse funds that allow the average investor to short the market with its commodity short funds being:

    • ProShares UltraShort DJ-AIG Commodity (NYSEARCA:CMD)
    • ProShares UltraShort DJ-UBS Crude Oil ETF (NYSEARCA:SCO)
    • ProShares UltraShort DJ UBS Natural Gas (NYSEARCA:KOLD)
    • ProShares UltraShort Gold ETF (NYSEARCA:GLL)
    • ProShares UltraShort Silver ETF (NYSEARCA:ZSL)

    On the other hand, its probably be a bad idea for investors with a long-term horizon to rush into these commodity short funds ahead of the China data releases near the end of the week but active traders might want to consider jumping in early it does not look like there will be much other news to cheer up investors this week as earnings reports start to wind down.

    This means that investors need to keep a close watch on the news feeds as well as our NextCandle.com stock forecasts because volatile and bearish markets can still mean profits for savvy traders who gain an edge by correctly guessing the direction a stock will head in for the day or week.

    NOTE: THIS PIECE WAS JUST POSTED ON THE NEXTCANDLE.COM BLOG.

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