Sunday, June 15, 2008

The US Dollar, Agriculture Charts, and New ETFs

The above chart is a daily chart of the US Dollar Index. As you can see, the Dollar recently broke out of a bullish triangle formation and is now trending up. This fact has put downward pressure on both gold and silver, and I think there is a good chance that this will continue happening for at least the short term.

One commodity that is catching my eye, and does not seem to have been affected by dollar strength is agriculture. Like oil and gold, the fundamentals for grains appear very strong right now. I can't go into all the reasons why here, but I will at least show a chart of this sector:

The above chart shows an index that combines the price of soybeans, corn, and wheat. The main points are that the trend is up, which is key, and also that a bullish breakout has just occurred.

There are several ETFs that more or less track this index. I have purchased one that trades on the TSX, and the ticker is What is interesting about this particular ETF is that it does twice the daily performance of the underlying index. There are other ETFs that track this index. Two tickers that I know are DBA, and JJG.

Finally, here is a longer term chart of the same chart posted above. It goes back about 15 years:

In my view, grain prices have been falling for decades, and are only now emerging from a deep bear market. Unlike gold or oil, which I would say are in perhaps the third inning of a major bull market, grains seem to be entering the first inning of a major long term bull market.

Along with silver, gold, and copper, this is one commodity I plan on holding for at least the next ten years.

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