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Sturdy Like a Moth: The Fate of the Commodities (DBC)

Posted on July 4, 2019

Today’s trade is about the commodities as a group – where they’re coming from, and where they’re headed.

Scared?

Short and Long Term Charts

We’re going to take a peek at what’s going on with the bellwether Invesco Deutsche Bank Commodity Index ETF (NYSE:DBC), a very good proxy for action on the entire asset class.

And we’ll start with the daily chart for the last six months –

There’s a good bit to parse here, and it goes like this –

  1. For roughly a month the moving averages for the stock have been unfurled lower (in black), confirming bearish intermediate term action is now underway.
  2. Once price moves below the short term MA for good, we’ll have a full-on bearish move in that department, too.  It hasn’t happened yet, but the blow-up shows just how close we are.  Another one percent decline (circled, in blue), would get us there.
  3. The likelihood of that happening is boosted by the gap that exists through the $15.40 level (in red).  If that gets filled – as it could in the next trade session – we’ll be on our way toward much deeper losses.
  4. That action would also likely drag RSI and MACD indicators (in green) sub-waterline, indicating to all that a bear move was on.

Look now at the weekly action for DBC, because there, too, the broader picture is no singsong –

  • To open, we have both RSI and MACD weekly indicators below their respective waterlines, an unequivocally negative phenomenon (in green).
  • We have all weekly moving averages unfurled lower and price beneath them all (black blow-up).
  • And finally, we see the repeated failure of DBC to retake its long term rising trend channel, despite efforts that began back at New Years’ (in red).

All told, it looks about as good as Whinny the Moth’s chances against Kermit the Mighty.

Today’s trade is a long tongue speculation on further losses for the commodity sector.  Unless there’s a quick break in trade tensions on the China front, we don’t see much hope for DBC,

We’re playing it with a ratio-write on the January, 2020 expiry.

A Jew and his Gold recommends you consider selling two (2) DBC January 17th 16 CALLs for $0.45 each and using the proceeds to purchase three (3) DBC January 17th 14 PUTs for $0.30 each.  Zero premium is the result.

Happy 4th of July to all you Americans out there.

And many happy returns,

Matt McAbby

 

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