ETF Top Gainers From Last Week – It’s All About Commodities

by ETF Base on October 10, 2010

Broader indices rallied again this week with the S&P500 (SPY) up over 1.5% – very much buoyed by the prospects of a new round of Quantitative Easing following another lackluster jobs report. We’ve been seeing the US dollar continue to decline in terms of other major currencies but Treasuries continue to rally, with the 10-Year yield breaking below 2.5%. Shorting Treasuries may well turn out to be the trade of the century, but many caution that it’s too soon, without first understanding just what the QE2 program may look like.  The markets may have largely priced in a huge outlay and if the final program is a disappointment, we may well see Treasuries unwind and commodity prices come back to earth.

Weekly, I highlight some top performers from the prior 5 trading sessions and I’m sure to include non-leveraged ETFs as well since leveraged ETFs will always compose top performers given their magnitude amplification.  Note that this week was also met with an exciting ETF Trading development whereby you can now trade 100 ETFs free through a major discount broker.

Conventional ETFs/ETNs

JJG – iPath DJ-UBS Grains TR Sub-Idx ETN – Up 14% – Grains are hot, as are virtually all commodities of late.  Corn, especially has been driving the performance of many of the soft commodities ETFs.  This phenomena was buoyed by an announcement from the USDA last week whereby output expectations for corn were slashed.  JJG gained over 10% on Friday alone on the news.

SGG – iPath DJ-UBS Sugar TR Sub-Idx ETN – Up 14% -SSG was boosted last week as well by the same corn shortage report.  Sugar has appeared on this list for several weeks now, with SGG up 22% over the prior month and up 64% over the prior 3 months.

SLV – iShares Silver Trust – Up 5% – While gold’s been getting all the headlines with now even ATMs dispensing gold (beyond ridiculous), silver is actually outperforming.  Last week, SLV was up 5% vs. a gain of 2% for GLD and over the prior month SLV has doubled the return of gold at 18% vs. 8% for GLD.  YTD, SLV is up 37%.

Note that many exchange traded products that deal with commodities are exchange traded notes (ETNs) as opposed to ETFs. ETNs are subject to issuer solvency risk and when relying on futures, they can decline over time compared to their underlying asset class due to futures roll.

Leveraged ETFs

DAG – PowerShares DB Agriculture Dble Long ETN – Up 27% – As would be expected with the strong performance of the underlying non-leveraged soft commodities ETNs, DAG was up huge last week at 27%.   Take note though that due to fluctuation in pricing from daily resets of leveraged ETFs and ETNs, DAG is up only 9% on the year.

AGQ – ProShares Ultra Silver – Up 10% – AGQ is the 2X daily return silver ETF, so naturally, it was up double SLV for the week.  What’s especially impressive to watch though is that even longer term, AGQ has been able to overcome the typical leveraged ETF value decay since the trend has been very consistently upward.  For the prior month, AGQ is up 37% and YTD, up 67%.

ERX – Direxion Daily Energy Bull 3X Shs – Up 8% – For some perspective outside the metals and soft commodities complex, oil had a strong week also, driving the 3X Energy Bull ETF up a respectable 8%.  Oil has been relatively range-bound on the year with an uptrend of late.  As such, ETX is up 26% over the prior month, but is actually down 7% on the year.  This is the plight of the leveraged ETF – the trend must remain intact or else value decline sets in due to daily resets.

Disclosure: Long GLD.

{ 1 comment… read it below or add one }

jbc November 1, 2010 at 4:10 pm

the comment
“Take note though that due to fluctuation in pricing from daily resets of leveraged ETFs and ETNs, DAG is up only 9% on the year.”
is incorrect. DAG is reset once a month.

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