Every year, the Dow Jones-AIG Commodity Index (DJAIG) rebalances for the upcoming year. This is significant for investors in that the DJAIG is followed by many investors looking to obtain commodity exposure. Exposure can be obtained through various investment vehicles created to mirror the index and rebalancing of the indices can create significant price movement as they occur.

The graph below shows the commodity index percentages for 2007 and 2008 with the changes in the final graph.

As shown above, the index will be rebalancing to more heavily favor aluminum, zinc, and natural gas while wheat, soybeans, and crude oil will see their weightings drop the most. While this may not set a trend for 2008 it is worth noting that the indices will be reweighing over the next month and this may cause some odd and unexplained price moves as positions are rebalanced.

Source: Dow Jones Indexes website

http://www.djindexes.com/mdsidx/?event=showAigHome

http://www.djindexes.com/mdsidx/index.cfm?event=showAigWeightings

By David Urban

http://blog.myspace.com/global112

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