BRAZIL STOCKS BOUNCE BACK FROM BIG SOCCER LOSS -- METAL STOCKS CONTINUE TO SHINE -- FREEPORT MCMORAN COPPER & GOLD BREAKS OUT -- ALCOA HITS THREE-YEAR HIGH -- NEWMONT MINING HELPS LEAD GOLD SHARES HIGHER
BRAZIL IS GAINING ON GERMANY ... No, that's not a comment on a soccer game. It's a comment on the fact that Brazil stocks are doing better than Germany's this year (unlike their soccer team). That's a reversal of trends seen since 2011. Over the last three and half years, Germany iShares have gained 45%, while Brazil iShares have lost -29%. Brazil is a big exporter of commodities and suffered from the slump in commodities since 2011. However, rising commodity prices during 2014 have reversed those trends. Brazil iShares have gained more than 10% this year, while Germany iShares are flat. While Brazil was eliminated from the World Cup yesterday by Germany (in one of the most lopsided scores in history), its stock market didn't suffer any negative side effects. The daily bars in Chart 2 show Brazil iShares (EWZ) climbing 1.5% today to it make the world's strongest stock ETF. Chart 3 shows Germany iShares (EWG) bouncing today after slipping below its 50-day line yesterday. Brazil may do better on trading floors this year than it did on the soccer field.
Chart 1
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Chart 2
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Chart 3
FCX AND ALCOA STRENGTHEN... Metal prices (industrial and precious) have seen the strongest commodity gains recently in trading pits. Their stronger action is being reflected in stronger metal shares. The weekly bars in Chart 4 show Freeport McMoran Copper & Gold (FCX) having broken through its late 2013 high to register an upside breakout. Its relative strength line (gray area) has started to rise also. FCX has been helped by a rising copper price. Aluminum prices have been rising as well which helped make Alcoa the day's strongest S&P 500 stock. The weekly bars in Chart 5 show Alcoa (AA) climbing to the highest level since 2011. Its relative strength ratio has been climbing since mid 2013. Precious metal stocks are also doing better.
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Chart 4
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Chart 5
GOLD STOCKS REACH FOUR-MONTH HIGH ... A jump in the price of gold helped make precious metal shares one of the day's strongest groups. [A weaker dollar also helped]. Chart 6 shows the Market Vectors Gold Miners ETF (GDX) climbing 2.6% and putting it at the highest level since March. Its relative strength ratio (solid area) is climbing as well. Newmont Mining (NEM) was one of the day's biggest gold gainers. Chart 7 shows NEM rising 2.9% (on rising volume). The stock recently bounced off its 200-day moving average which is now acting as support.
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Chart 6
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Chart 7
STILLWATER MINING TIED TO RISING PALLADIUM AND PLATINUM PRICES ... My last message showed rising palladium and platinum prices. The stronger of the two is palladium which is in the process of testing all-time highs. [Both metals are used as catalytic converters in automobiles and are benefiting from the upturn in the auto industry]. Stillwater Mining (SWC) is based in Montana and is the only producer of palladium and platinum in the U.S. The weekly bars in Chart 8 show the mining stock rising to the highest level in three years. Its relative strength ratio (solid area) has been rising as well. The upper solid line shows the price of palladium testing its 2011 high. Add Stillwater to the list of mining stocks that are starting to benefit form rising metals prices.
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Chart 8
AUTOS CONTINUE TO STRENGTHEN ... Stocks bounced back today from yesterday's losses. Consumer discretionary stocks were the day's strongest sector. Autos were a big reason why. Chart 9 shows the Dow Jones US Automobile Index ($DJUSAU) climbing 1.5% and nearing a new yearly high. Its relative strength ratio (solid area) has been rising since May. The line in top shows platinum recently hitting a new 10-month high. Stronger auto sales increase demand for platinum and palladium. Ford was the day's strongest auto stock.
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Chart 9
FORD LEADS AUTO SECTOR HIGHER... The daily bars in Chart 10 show Ford (F) gaining 1.8% to lead the auto sector higher. The auto leader hit a nine month high in the process. That puts Ford in position to challenge its 2013 high formed last October. Ford's relative strength ratio (gray area) has been rising all year and today hit a six-month high.
