David Rosenberg, while still bullish on commodities, is getting somewhat cautious:
We have been and remain long-term commodity bulls, but over the near-term, caution may be the watchword. The reason for this is because China is the key demand-driver for the group and Steve Roach pens a fascinating but disturbing assessment on page 22 of the FT after years of being rather bullish (see I’ve Been an Optimist on China. But I’m Starting to Worry). Basically, what it boils down to is short-term-ism in the fiscal stimulus package, which has re-engineered a credit bubble (bank loan growth is running at a record pace over the past six months and is three times the pace of a year ago) and the public sector capex drive has accounted for 88% of Chinese GDP growth so far this year (double the contribution over the past decade) — this is clearly unsustainable. According to Mr. Roach, China accounted for an amazing two percentage points of global GDP growth in the second quarter, which helps explain the export bounce in the rest of the continent. Unless private sector investment and personal consumption begin to take over, the prospect of a reversal is not trivial.
If you agree with Rosenberg, one way to play this would be to short (or sell, if long) commodity ETFs such as DBC. Otherwise, keep an eye on the China market as a whole with ETFs such as FXI or GXC. I'm not one to get in the way of a trend and China has been hot this year, so if you're looking to short China or commodities wait for confirmation, such as a drop below a long term moving average like the 200 day and for the love of God, use stops! You can also use FREE trend analysis, emailed to you daily, to help make any buy/sell calls (I personally use this service). Just click here.