Monday, August 2, 2010

Bookkeeping: Starting a Commodity Basket - Freeport McMoran & Gold (FCX), Potash (POT), Walter Industries (WLT), and Cleveland Cliffs (CLF)

I wrote a week and a half ago that the algos were moving into the commodity trade... [Jul 23, 2010: HAL9000 Starting to Get his Commodity Play On]  I should have listened to myself.  It looks to me like a huge allocation trade is happening where the big money is moving from the tech stocks they rode for a few months, into anything in the CRB index (i.e. commodities).  Since the individual names mean nothing to HAL9000, I wish there was an ETF with the top 8-10 hedgie favorites.  Instead I have to build my own basket so I am going to put together a 4 prong approach with hedge fund favorites FCX, POT, WLT, CLF.  I picked these 4 but feel free to throw a dart at any number of 100-200 commodity stocks and you will get almost the identical chart. 

It is almost meaningless to tell you what they do, since it means nothing to HAL but respectively they are copper, fertilizer, coal (met and steam), and iron ore.  I am streamlining as a few of these names have other businesses. 

Since I am "chasing" here I am going to simply put 0.5% into each of the 4, to build a 2% allocation and since they all have almost identical charts will add and subtract from them as 1 big allocation trade.  As if I were HAL9000 myself.  If they all begin to break down below their recently cleared 200 day moving averages, you know the script... back to the curb they will go.

Long all names mentioned in fund; no personal position

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