Our scanner picked up DBC as a solid breakout candidate on our weekly scan. The breakout of the commodity sector is very significant. We have been in a very long deflationary cycle that pushed the interest rates to the lowest in the last 5000 years! With such large bond bubble in historic proportions, we suspect when it finally deflates, it will create significant disturbances in all financial matters.
Is the DBC fund breakout a precursor of the pending bond bubble burst? Will the new FED chairman be forced to increase the interest rates faster than he wishes due to the inflation pressure? We don’t have all the answers at the moment. But the DBC chart surely is telling us loud and clear that the commodity sector is waking up, even though oil hasn’t broken out the range yet.
DBC fund seeks to track changes, whether positive or negative, in the level of the DBIQ Optimum Yield Diversified Commodity Index Excess Return™. The fund pursues its investment objective by investing in a portfolio of exchange-traded futures on the commodities comprising the index, or the index commodities. The index commodities are Light Sweet Crude Oil (WTI), Heating Oil, RBOB Gasoline, Natural Gas, Brent Crude, Gold, Silver, Aluminum, Zinc, Copper Grade A, Corn, Wheat, Soybeans, and Sugar.
We recommend our readers begin to add exposure to commodities in the early phase of the cycle. DBC fund is an easy approach to get exposure in commodities.
The entry is around 16.00, stoploss is 13.65. If it goes below 13.65, we would liquidate the trade and move on to the next trade.