A little known ETF that trades on the average of under 30,000 shares a day is tied for  the highest year to date return for  Exchange Traded Funds for 2007. The fund is the Mrket Vectors Steel Fund (SLX) managed by Van Eck.

In recent times Emerging market and  Energy funds have led the charge in the ETF world. Now we are seeing a Steel Related Fund leading the pack. This may surprise a lot of investors. Industry consolidation and the global demand for steel has made this a solid sector for 2007.This fund is up 29% for the year as of April 27^th.

The top holdings in this ETF include Brazilian mining firm Companhia Vale do Rio Doce (RIO), Anglo-Australian Rio Tinto Plc (RTP), Arcelor Mittal (MT), and POSCO (PKX).

This has traditionally been a volatile sector, however a number of factors are leading this sector to higher growth. Due to consolidation there are fewer companies in this sector. The management of these companies has become  much better at negociating labor contracts. The leading growth factor has been the demand for steel from emerging markets such as China. Steel related stocks are not only attracting attention of M&A investors but also momentum investors

A little known ETF that trades on the average of under 30,000 shares a day is tied for  the highest year to date return for  Exchange Traded Funds for 2007. The fund is the Mrket Vectors Steel Fund (SLX) managed by Van Eck.

In recent times Emerging market and  Energy funds have led the charge in the ETF world. Now we are seeing a Steel Related Fund leading the pack. This may surprise a lot of investors. Industry consolidation and the global demand for steel has made this a solid sector for 2007.This fund is up 29% for the year as of April 27^th.

The top holdings in this ETF include Brazilian mining firm Companhia Vale do Rio Doce (RIO), Anglo-Australian Rio Tinto Plc (RTP), Arcelor Mittal (MT), and POSCO (PKX).

This has traditionally been a volatile sector, however a number of factors are leading this sector to higher growth. Due to consolidation there are fewer companies in this sector. The management of these companies has become  much better at negociating labor contracts. The leading growth factor has been the demand for steel from emerging markets such as China. Steel related stocks are not only attracting attention of M&A investors but also momentum investors

Following up on the Internet sector were many funds associated with the energy sector. Oil Service Holders (OIH), PS Oil Services (PXJ), PS Energy Exploration and Production (PXE), US Oil Fund (USO) all showed strong returns this past week. With the foiled raid on Saudi Oil facilities and the Tamil attacks on Sri Lankan Oil facilities, the oil markets will remain jittery for some time.

The funds showing the biggest losses this past week were the Gold and Silver ETF’s.  Gold and Silver often have some correlation with Oil so if the energy markets continue to rise, it will be worth watching this sector for a turn around.

TrimTabs Investment Research, a Santa Rosa, California-based firm that tracks market trends for institutions, said late Wednesday that investors pulled $2.9 billion from global equity and exchange-traded funds so far in March, even higher than an estimated $2.3 billion of outflow from U.S. equity funds for the same period.
One trend that may be shifting is the ETF allocation of funds to non-U.S. markets. It appears that a trend is forming in which investments in non-U.S.  Markets are coming back into U.S. Equities.

In the current turmoil of the markets it would be expected to see a rise in the Gold market. When there is turmoil which we have seen this week, in the past, Gold would be seen as a safe haven for equity investors to put their money. This week we have seen markets all over the world dive, including the Gold markets? Many perplexed investors are asking why.

If you want to look at the Gold market from the point of technical analysis, it is very disconcerting that Gold has been unable to push upward through the $685 and $690 range. For technical traders this is a bearish sign.

There is massive liquidation in the Gold and Silver markets. This behavior has confounded investors, who expected money fleeing the equity markets to go into the precious metal markets, which have traditionally been a safe haven in times like this.

One theory is that investors who held Gold and Silver in their portfolios had to sell off the Gold and Silver to cover their losses in the equity markets. This theory does have some relevance.

The fundamentals do favor Gold and Silver. There is a tight supply in the physical commodities of precious metals and this should keep prices up. If the U.S> economy moves into a recession Gold should be a haven for investors. Everything is in place, fundamentally for Gold and Silver prices to recover.

So without trying to forecast prices, everything point to a quick recovery of prices in the precious metal markets. This doesn’t mean it will happen on Monday March 5^th. We may still see some liquidation in positions. However, over the next few weeks the prices in the metals markets should stabilize and begin to rise again. If not, then there are other market forces at work here that are very unusual.

The news is full of stories how oil prices are falling. There are stories of this being due top a mild winter and a lack of demand. I have even seen business writers claiming oil will be returning to $30 a barrel.

You know the price of a commodity is about to reverse when you seeing these stories hit the press. The smart money at this point is probably going back into oil related stocks. Oil stocks are holding up very well considering oil itself is tanking. The investment money is not flowing out of oil related issues. We are having this downturn, however none of the fundamentals have changed. There is not suddenly an oversupply of oil, there is not suddenly no demand for oil. The fundamentals have been much the same as they’ve been for the last year. Nothing has happened that warrants the rapid and violent sell off in oil.

Crude oil could drop as low as $45 a barrel without negating the latest uptrend for oil. It is doubtful it will go that low. The charts are indicating that the oil price seems to be bottoming and is now stabilizing.

There is still a large demand for oil from China. India still needs oil, and yes American citizens are not all taking public transportation. The last time I looked at the news I noticed that the Mideast is not yet on the verge of peace. US ships are moving closer to Iran’s waterways, Israel and their neighbors are not yet at peace and there are a number of countries in the region that have an interest on how things in Iraq pan out.

OPEC will again meet in March. As reality begins to set in, it is likely the short sellers in the oil markets will begin to run for cover. It is just a matter of time before the pendulum begins to swing back the other way. It looks like oil related issues are on sale this January. Now may be the time to grab them before the price goes up.

In other words, promising assets between the pair alters the ETFs’ share prices to synthetically reflect oil’s movement. This makes it a lot easier for investors who would normally not go anywhere the futures market to get exposure to oil prices in their portfolio.

Think oil prices are going to drop? Well Claymore has you covered there too. Claymore also operates a fund (DCR) that is designed to provide positive returns to investors when the price of oil is falling. Using these two funds, investors have a number of ways to invest in oil prices and devise their own hedging strategies.

The fund trades in MacroShares. The MacroShares have a maturity of 20 years from the original offering date, but as with all ETFs investors can sell their shares throughout the trading day. If the shares move 85% away from their initial prices in either direction for three straight trading days, a termination is triggered. The shares then would distribute all assets back to shareholders at the end of the quarter, and Claymore would issue a new pair.

Therefore, investors in the Claymore MacroShares could lose most or all of their initial investment if oil prices move dramatically against them. How likely is this? If the initial shares were offered at $60 a barrel, that means oil prices over a period of 3 days would have to move about $51 up or down away the $60 buying price. Yes it is possible, but very unlikely.

How Are these Shares Different From Their Competitors?

The Claymore MacroShares are structured very differently from other oil-linked ETFs on the market such as U.S. Oil Trust (USO) which invests in oil futures and “rolls” the contracts to maintain exposure.

Barclays Global Investors manages an “exchange-traded note” called iPath Goldman Sachs Crude Oil Total Return ETN (OIL).

PowerShares Dynamic Oil & Gas Services Portfolio (PXJ) invests in shares of publicly traded energy companies.

Commodity ETFs that use futures, such as U.S. Oil Trust, can produce either positive or negative “roll return” based on the relationship between spot prices and longer-dated futures contracts. Any capital gains are passed to investors and are taxed as 60% long-term gains and 40% short-term gains.

Sometimes, futures prices are lower than the spot price for a commodity, a condition known as “backwardation.” In the opposite situation, called “contango,” investors experience a negative roll yield because futures prices are higher than spot prices.

Claymore said its MacroShares won’t experience either situation because they synthetically provide exposure to oil prices by pledging assets, and don’t use futures.

So investors can invest in Claymore MacroShares by themselves or use Claymore with one of the other funds to create a hedge.

The options for investors are becoming greater and greater but the complexities are also increasing. Investors should become familiar with the vehicle they are investing in before money is committed. As ETFs move more and more into the commodity based areas, investors will have investment options never open to the middle of the road investor before.