Investor sentiment toward commodities over recent weeks has been mixed due in part to heightened volatility and shifting fundamentals. In this article, we dig into the charts of key funds from different segments of the commodities market to determine the best trade setups heading into September. (For more, see: Commodities: The Portfolio Hedge.)

Commodities Market Performance

One of the most popular exchange-traded funds (ETFs) used by investors for gaining exposure to a diversified basket of commodities is the iShares S&P GSCI Commodity-Indexed Trust (GSG). Fundamentally, the holdings span energy, agriculture and metals. Taking a look at the chart, you'll notice that the 50-day moving average crossed below the 200-day moving average in April, which is known as a death cross (shown by the red circle). This common technical sell signal is usually used by active traders to mark the beginning of a long-term downtrend. This chart is also a textbook-style example of how the price of an asset generally behaves near a major level of resistance such as the 200-day moving average after a major sell signal has been triggered. Traders would expect this resistance to continue over the months ahead and will likely hold a bearish outlook on the general commodities market until the price rises above resistance. (For more, check out: Major Resistance Levels Suggest Commodities Are Headed Lower.

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Technical chart showing the performance of the iShares S&P GSCI Commodity-Indexed Trust (GSG)

Energy

With the fund's overweight position in energy commodities, it is unsurprising that the pattern of GSG closely matches that of the PowerShares DB Energy Fund (DBE). As you can see below, the bearish crossover between the long-term moving averages signaled a significant move lower for those who utliize technical analysis. The bulls have been unable to reclaim the momentum since the retest of resistance in May, and the recent run back toward $12.40 has many technical traders eyeing another move lower. Traders will likely maintain a bearish outlook on energy until the price of the DBE ETF closes above the combined resistance of the descending trendline and the 200-day moving average. (For more, see: 3 Charts That Suggest Commodities Are Headed Lower.)

Technical chart showing the performance of the PowerShares DB Energy Fund (DBE)

Gold

From the perspective of an active trader, the most bullish chart in the commodities markets at the moment belongs to gold and gold-related ETFs. Taking a look at the chart of the PowerShares DB Gold Fund (DGL), you can see that the price is trading within the confined range of a rectangle pattern. The defined levels of support and resistance create easy-to-identify levels for order placement. The break above the long-term averages and the subsequent run toward the upper trendline now suggests that the bulls are taking over. After a few more strong closes, it would not be surprising to see a significant move higher. (For further reading, check out: Active Traders Are Turning Bullish on These Commodities.)

Technical chart showing the performance of the PowerShares DB Gold Fund (DGL)

The Bottom Line

Bearish chart patterns on broad commodity funds such as GSG suggest that the bears will likely remain in control of the momentum for the days and weeks ahead. However, pockets of strength in areas such as gold suggest that the most reward will probably come to those who choose to be as selective as possible in adding exposure. (For more, see: Trade Commodities With These 3 ETFs.)

Charts courtesy of StockCharts.com. At the time of writing, Casey Murphy did not own shares in any products mentioned.