Track Metals Not Energy
- Posted by Greg Harmon
- on November 21st, 2012
When it comes to tracking ETF’s the there are winners and losers. The Equity Indexes S&P 500, Russell 2000 and NASDAQ are tracked very well by the $SPY, $IWM and $QQQ. Maybe because there is a lot of liquidity in these ETF’s, and the Indexes are not easily traded outside of the Futures. Maybe they have been around long enough for the fees to be reigned in. Whatever the
case they are a good fit. But when you get out side of these the tracking ETF’s are not all created equal. Take a look at the metals. The chart for Gold above shows the Futures and the ETF $GLD. On a first glance you cannot tell the difference between the too with the Futures looking more like a 2 day Simple Moving Average. The chart below for Copper Futures against the ETF $JJC is similar
but with a little more dispersion. But when you compare these to the energy charts it gets crazy. Look at the comparison for Crude Oil Futures and the ETF $USO in the chart below. After tracking well up through the fall into 2009 the Futures have been up big over the last 3 years with the ETF running sideways. Hmmm. But this is not an isolated case. The last chart, Natural Gas Futures and
the ETF $UNG is just as bad. the general downtrend is the same but look at the bump in eh Futures with a steady decay in the ETF. You could run a lot of quantitative analysis on fees on each fund and determine the liquidity of the underlying and perhaps come up with a solid explanation for this. For me it is enough to know that they do not track well and only use them for very short term purposes if at all.
Join the Dragonfly Capital Views Premium Membership
These trade ideas are one piece of the Premium Service, which is complemented by weekly trend analysis, daily earnings plays and access for personalized analysis. Sign up here to get deeper analysis and nearly 50 trade ideas every week.
If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
- The Cup Looks Full on Sally Beauty Holdings
- My Thoughts on A Possible Pullback on the S&P 500 (video)
- Top Trade Ideas for the Week of September 15, 2014: Bonus Idea
- Top Trade Ideas for the Week of September 15, 2014: The Rest
- Top Trade Ideas for the Week of September 15, 2014: The Rest Premium
- Top Trade Ideas for the Week of September 15, 2014: The Best
- SPY Trends and Influencers September 13, 2014
- Macro Week in Review/Preview September 12, 2014
- How to Adjust to the Roller Coaster Market
- Watching DirecTV for a Sunday Ticket Higher