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Bolling: Ride Defensive ETF Trades Until the Tide Turns

05/12/08 - 08:29 AM EDT

Eric Bolling

I could not be more content. I am sitting on my deck overlooking the ocean with a 24 ounce coffee, Barron's and my dog by my side. I am watching some awesome waves --three to four feet -- perfectly breaking into the very high tide. The tide is as high as it has been since I built this place last year (yep, I did indeed top-tick the real estate market!) That's ok with me though, given the fact that I am able to write this column on my laptop, with this view.

Watching the power of the ocean, I can't help but think of the amazing flow of money into the commodity trade over the last 12 to 18 months. Like the tide, money flows in and out of sectors. I have to admit that even with the commodity bullish perspective I maintain, I am surprised at the massive investment flow.

It should come as no surprise that the sectors' whose tides have retreated, notably housing (Hovnanian(HOV - Cramer's Take - Stockpickr), Beazer(BZH - Cramer's Take - Stockpickr) and Pulte(PHM - Cramer's Take - Stockpickr) and financials (Bear Stearns(BSC - Cramer's Take - Stockpickr), Citigroup(C - Cramer's Take - Stockpickr), Countrywide(CFC - Cramer's Take - Stockpickr) and Ambac(ABK - Cramer's Take - Stockpickr), etc.). I have suffered the inverse fate of the oil trade, see the U.S. Oil Fund ETF(USO - Cramer's Take - Stockpickr), the gold trade [see streetTracks Gold ETF (GLD)] and the grain trade, see Potash(POT - Cramer's Take - Stockpickr), Bunge(BG - Cramer's Take - Stockpickr), Deere(DE - Cramer's Take - Stockpickr), Monsanto(MON - Cramer's Take - Stockpickr), or the Market Vectors Global Agribusiness ETF(MOO - Cramer's Take - Stockpickr).

The commodity tide is still rising and will continue to do so until another pull signals that high tide has been passed and the water may retreat.

The only thing strong enough to change the tide would be a firming in the U.S. housing market. That would come in the form of a firming of home prices. We would need a few months of strength in prices coupled with a sustained drop in inventory of homes -- new and not so new. If this happened, it would signal that the worst is over for the homebuilders. But, very much more importantly, it would take the pressure off the banks holding assets tied to those home values. Only then will they see some light at the end of this long, dark tunnel.

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At time of publication, Bolling was long C, PG, KO and gold, and short oil, although holdings can change at any time.

Eric Bolling is a host on the new Fox Business Network. Bolling was one of the developers and original panelists (nicknamed "The Admiral") on CNBC's "Fast Money."

Bolling is an active trader specializing in commodities, resource trades and ETFs.

Bolling is a member of several exchanges including The New York Mercantile Exchange (NMX), The Intercontinental Exchange (ICE) and The Commodity Exchange of New York.

After spending 5 years on the Board of Directors at the NYMEX, he became a strategic adviser to that Board of Directors where he assisted in bringing the company (NMX) public. He has been included in Trader Monthly Top 100 in 2005 and 2006. Bolling was the recipient of the Maybach Man of the Year Award in 2007 for his contribution of philanthropy and willingness to de-mystify investing to Main Street.

Bolling graduated from Rollins College in Winter Park, Florida and was awarded a fellowship to Duke University. Bolling was an accomplished baseball player. He was drafted by the Pittsburgh Pirates where he played before his career was cut short due to injuries. He honors his baseball past by sporting the NYMEX trader badge, R.B.I.


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