FIGURE 1: DAILY CHART OF POWERSHARES DB COMMODITY INDEX TRACKING (DBC). Since July 2012, DBC has been trading above its 50-day moving average (MA) and in early August 2012 broke above its 200-day MA.
TRADING TICKET
PowerShares DB Commodity Index Trading (DBC)
This exchange traded fund (ETF) tracks changes in the level of the Deutsche Bank Liquid Commodity Index — Optimum Yield Diversified Excess Return, plus interest income from US Treasuries that the ETF holds. It invests in futures contracts on 14 of the heavily traded commodities. The commodities include light sweet crude oil, heating oil, RBOB gasoline, natural gas, Brent crude, gold, silver, aluminum, zinc, copper grade A, corn, wheat, soybeans, and sugar. The largest weightings are in light sweet crude oil, heating oil, Brent crude oil, and RBOB gasoline, which indicates that it has higher weighting in the energy sector. DBC is offered through Invesco Powershares:
Trading strategies: Considering that DBC is diversified among the most heavily traded commodities, you get the diversity of the commodities markets, especially in the energy sector.
It is structured as a partnership that invests in futures contracts. It is marked to market at the end of each year, which means that every year you will be apportioned a pro rated share of gains or losses. In the event that there was a very strong gain in any year, you may end up with a pretty significant tax liability. Something else to keep in mind is that you will have to fill out a Form-K1 every year. If you are prepared for all this additional administrative work and you want the exposure to the commodities market, DBC may be an ETF to consider.
FIGURE 1: DAILY CHART OF POWERSHARES DB COMMODITY INDEX TRACKING (DBC). Since July 2012, DBC has been trading above its 50-day moving average (MA) and in early August 2012 broke above its 200-day MA.