Wednesday's column ("2008 Was Golden ... Barely") left some readers with the impression that there were hardly any winners among the exchange-traded products (ETPs) tracking commodities.

Not so. The criteria for inclusion in Wednesday's list – long-only and a 200-day trading history – was rigorous. It screened out but three ETPs.

There were lots of commodity products, however, that made money for their owners in 2008. These unseasoned vehicles mostly offered short exposures to the commodity space, but there was one that stood out clearly as different from all the rest. This product's distinctiveness arises because it's not a long-only or a short-only index tracker. It "trades" commodities the way real people do by combining short and long positions.

A long-only bias works reasonably well with equities, especially in market-efficient sectors like large-cap stocks. There's a definite long-term trend toward higher prices exhibited by benchmarks such as the S&P 500 (though you'd be hard-pressed to think the past decade's action supports that notion). There's no such expectation of commodity prices, however. There's plenty of air – hot and otherwise – that's been blown into arguments over commodities' expected real return.

Let's put that aside for the moment and focus on something over which there's no argument: It's far and away much simpler to execute a short sale in the futures market than it is in the equities market. Futures contracts are created at will. Both sides to the trade put up the same margin deposit. If you want to legally short a stock, though, you've got to locate and borrow the issue before selling it. No borrowable stock, no short sale. You, too, must meet a margin requirement that the stock buyer could duck by using cash.

The point is that it's just as easy to sell short in futures as it is to buy. Futures traders effectively take on no more risk in short positions than they absorb in long positions.

So, kudos to the developers of the S&P Commodity Trends Indicator Total Return Index (S&P/CTI) for recognizing this. The CTI index is a composite of 16 commodity futures grouped into six sectors that positions each sector long, short or flat based upon its price behavior. Market momentum versus a seven-month moving average is the trigger for repositioning. The only options for the Energy sector, though, are long or flat. CTI countenances no shorts in Energy futures.

The index algorithm recently called for the reversal of its universal (well, almost universal) short positions, by waving bullish flags for Precious Metals and cocoa.

Recent S&P/CTI Sector Repositioning

S&P/CTI has been tracked since June 2008 by the ELEMENTS S&P CTI Exchange-Traded Note (NYSE Arca: LSC), an obligation of HSBC USA, an AA-/Aa3-rated financial institution. Since its launch, LSC has handily outdone notes based upon long-only commodity benchmarks such as the iPath Dow Jones-AIG Commodity Index Exchange-Traded Note (NYSE Arca: DJP).

LSC Vs. DJP

If you want the background numbers, they're here:

Time will tell if LSC's outperformance is sustainable. If nothing else, perhaps LSC momentum shifts can offer clues for positioning your own tactical portfolios.