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9 Things to think about before playing the Commodities Sell Off

9 Things to think about before playing the Commodities Sell Off via Attain Capital

Despite Twitter Inc (NYSE:TWTR)'s stock being at all-time lows (see our IPO post on that) – it's still a great way to get the pulse on markets, as witnessed by some panic induced tweets that have been swarming around commodity markets reminding us that commodities are getting slammed, that commodities aren't a good investment (depends on what exposure you're getting), and that commodities = Crude Oil (not true). But the questions remains, are commodities as a whole really taking a hit, or is it just the “big players” such as crude oil and gold that are seeing a sell off?

Behold, the current commodity carnage cliff notes: (we averaged the cash price move for each time frame of the commodity markets seen on FinViz for each sector, and sorted by return over the last 12 months).

Data as of 8/6/2015
Energy = WTI, Brent, Heating Oil, Gas RBOB Gas, Natural Gas, and Ethanol
Grains = Wheat, Corn, Soybeans, Soybean Oil, Canola Oil
Metals = Gold, Silver, Copper, Platinium, Palladium
Softs = Cotton, Orange Juice, Coffee, Sugar, Cocoa, Lumber
Meats Live Cattle, Feeder Cattle, and Live Hogs

Now, there are two kinds of people in the world. Those who look at the numbers above and want to ride the momentum lower and lower; and those who see the red above and start thinking about the inevitable bounce when the sell-off subsides and these markets start to rise. Do you Buy the Dip or Ride the Sell off Lower?

Buy the Dip?

If you're the type of person who sees a falling knife and reach out to catch it, if you're one of those looking to play a bounce, we'll first point you to – How to Play a Bounce in Crude Oil. Next, we'll offer these (some serious, some not) options:

  1. Buy a Commodity Index ETF like $DBC, $GSG, and $DJP, or sector specific ones like $XLE, $DBB, or $GRU. But only after you get fully up to speed and understand the ins-and-outs of Contango and Backwardation. If the...