From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley
The outperformance from commodities this year has been hard to ignore.
Over the trailing 52 weeks, the CRB index is up over 56% and our equal-weight commodity index is up over 37%. The entire space has been participating — energy, base metals, grains, and softs.
And even though precious metals have been trending lower since last summer, we can’t forget that gold kicked off the commodities rally by hitting new all-time highs last year.
If we’re only looking at stocks and bonds we’re cutting ourselves off from what is currently the top-performing asset class. It doesn’t matter whether we trade the markets on a more tactical timeframe or if we have a long-term investing approach. There is alpha in commodities right now and we want to have exposure.
But how do we take advantage of this space if we don’t have the ability to buy December futures contracts of Crude Oil or the March ‘22 futures contracts of Corn?
That’s where our commodity ETF/ETN list comes into play.
This is a list of some of the best options that equity investors have for participating in commodity markets.
All that green in the table illustrates the impressive strength from this asset class over multiple timeframes.
Our first fund was a recent mystery chart. This is the iPath Dow Jones Cotton ETN $BAL with about three years of price history:
As you can see, Cotton futures have been on an absolute tear.
When we presented this mystery chart, BAL had just poked through the breakout level of this multi-year base and was testing it from above. Bulls came out to defend this key level and price quickly rebounded higher.
We can use this well-defined setup in BAL as a way to express a bullish thesis on Cotton. If we’re above 57.75 we’re long with a target of 75.50 over the next 1-3 months.
If it slips back below the breakout level, BAL is a no-touch as risk is not in our favor.