Favoring Exposure Outside Of Equities

Everyone’s had their eyes eyes on crude oil over the past year for obvious reasons but if we look beyond oil there’s more to pay attention to.

$DBC is an ETF that tracks a basket of the major commodities. It includes things like gasoline, heating oil, Brent crude oil, WTI crude oil, gold, wheat, corn, soybeans, sugar, natural gas, zinc, copper, aluminum and silver.

It is still heavily weighted to oil and their charts do look similar but I prefer the setup and recent action in $DBC over $USO.



Last week we saw something that resembles a false breakdown island reversal in $DBC after it gapped up and reclaiming the prior 13.25 support level. Also notice the potential for this move to become a higher low in an emerging trend off the January lows.

Next is a ratio chart of DBC versus the $SPY. Notice the clear range-bound relationship and the false breakdown from last week making itself even more apparent on this chart.

Suggestive that DBC might continue to outperform the SPY over the near term, perhaps to the top end of this range.


This is some of the analysis we went through last week when we purchased DBC on Friday.

This coupled with the fact that the near-term outlook of the $SPY looks uncertain at best as we approach earnings season, which means we favor exposure outside of equities.

Of course there is risk in commodities coming under pressure if the US dollar decides to snap back strong (among other factors), but that’s what stop losses are for.

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Evan Medeiros

Evan is the founder of the Trade Risk. With 25 years of coding experience and a B.S. in computer science, Evan brings a systematic discipline to investing in the stock market.

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