The ELEMENTS platform has just seen another commodity-related exchange-traded note launch, but this one has a twist.

The ELEMENTS Linked to the S&P Commodity Trends Indicator - Total Return (NYSE Arca: LSC) is not your typical commodity ETN. The S&P CTI covers 16 commodity futures in six different sectors—nothing unusual about that. But rather than simply using long positions in each commodity, LSC takes a long/short approach based on momentum trends in each commodity sector.

The theory behind LSC is that most commodity sectors are cyclical in nature—they tend to go through long periods of up and down movements. As a result, the S&P CTI takes long or short positions in each sector based on how current prices compare to an exponential—moving price—average (i.e., more recent prices are weighted more heavily in calculating the moving average).

Interestingly, Energy is not viewed as cyclical and so is never short in the index.  

(Not shorting Energy is a typical rule in commodity trend investing. Proponents of these systems argue that energy is too volatile and overly subject to exogenous events that can send prices skyrocketing over short periods of time. In other words, if the U.S. invades Iran, you don't want to be caught shorting short crude futures.)

In taking long positions in rising commodities and short positions in falling ones, according to S&P, the S&P CTI is "designed to measure the extent and duration of price movements and volatility among the component sectors." But ultimately, the index is also attempting to translate the component commodities' movements into upside performance, even if their prices are falling. A significant portion of the investment community believes that traditional commodity futures indexes leave some level of performance on the table, and that a seasonal, cyclical or other long/short approach offers a real alternative.

Besides Energy, the represented sectors include Grains, Softs, Livestock, Precious Metals and Industrial Metals. Energy was by far the largest sector at 37.50% of the index as of the end of 2007, while Grains carried a 23.00% weight.

The ETN is the first to be issued by HSBC USA Inc., which is new to the ELEMENTS platform. The platform's other issuers include Credit Suisse, Deutsche Bank and Swedish Export Credit Corp.

LSC charges an expense ratio of 0.75%.

Read the prospectus here.