Amid the swirl and conflicting opinion on inflation and its potentially caustic effect on the economy, few on Wall Street appeared to have noticed the big decline in commodities prices during the last six weeks. In fact, one glance at a price chart of the PowerShares DB Commodities Index Tracking Fund shows us just how sharply commodities prices have fallen of late.
I bring this trend in commodities to your attention for two reasons. First, it’s important to know some of the driving factors that contribute to monetary policy and that can have a profound effect on the equity and bond markets. Second, whenever I see a steep drop in an index, bells start going off in my head that alert me to a potential profit opportunity in my ETF Trader service.
And while I am not ready to declare myself on board with a future turnaround in the commodities market, it is important to recognize trends and their potential reversal points when your goals are short-term profit maximization. It’s these turnaround candidates that often give investors big returns. However, it requires a skilled analyst to know the difference between a comeback and a laggard.