ALCOA AND FREEPORT MCMORAN CONTINUE TO RISE WITH INDUSTRIAL METALS -- SO DO STEEL STOCKS -- AKSTEEL, STEEL DYNAMICS, AND RELIANCE STEEL CLEAR 200-DAY AVERAGES -- AUSSIE AND CANADIAN DOLLARS ARE RISING WITH COMMODITIES
ALCOA AND FREEPORT MCMORAN LEAD MARKET HIGHER ... A lot of attention is being paid to the recent upturn in the price of oil and energy shares, and its potentially positive influence on the global economy and stocks. An even more impressive upturn is taking place in industrial metals and their shares. That too carries potentially good news. I've recently shown new buying taking place in aluminum and copper producers like Alcoa and Freeport McMoran. Both of those stocks are among the top gainers in the S&P 500 today. Chart 1 shows the big copper producer Freeport McMoran (FCX) climbing 5% to a new three-month high. Its relative strength ratio (above chart) is rising as well. That's on the back of a rising copper price. FCX still has a way to go to reach its 200-day moving average. Chart 2 shows the aluminum producer Alcoa (AA) having already reached its 200-day line. That resistance line hasn't been exceeded in a year. It's relative strength ratio is rising as well. Even more impressive price gains are taking place among individual steel stocks.
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Chart 1
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Chart 2
STEEL STOCKS CLEARING 200-DAY LINES... Chart 3 shows the Dow Jones US Steel Index ($DJUSST) reaching the highest level in four months and nearing a test of its 200-day moving average. Its relative strength line (top of chart) is also rising. Several individual steel stocks have already exceeded their 200-day line. Chart 4 shows AKSteel (AKS) doing so for the first time in more than a year. Its RS line (top of chart) has bottomed as well. Chart 5 shows Steel Dynamics (STLD) clearing its 200-day line and rising to the highest level in six months (with a rising RS line). Chart 6 shows Reliance Steel & Aluminum (RS) reaching a nine-month high. Reliance is obviously the strongest of the three. The fact that steel and other industrial metal stocks are starting to rise faster than the general market is potentially a positive sign that industrial metals are bottoming. That's a positive sign for the global economy and stocks.
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Chart 3
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Chart 4
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Chart 5
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Chart 6
COMMODITY CURRENCIES ARE STARTING TO CLIMB... I've commented on the fact that stocks and currencies in commodity producing emerging markets like Brazil and Russia have been rising lately. The same may be happening with developed market producers like Australia and Canada. Canada is more heavily influenced by oil, while Australia is more dependent on the price of iron ore and steel. The good news is both of their currencies are starting to rise. Chart 7 shows the Australian Dollar ($XAD) nearing a test of its 200-day average. That resistance line hasn't been exceeded in eighteen months. At the same time, Chart 8 shows the Canadian Dollar ($CDW) turning up in mid-January and having risen to the highest level in three months. Both currencies are highly correlated to the direction of commodity prices, and to each other. The fact that both are rallying at the same time is another hint that commodity prices may also be bottoming. That would be a positive sign for their stock markets which are also heavily dependent on commodity markets.
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Chart 7
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Chart 8
TRUCKERS SHIFT TO HIGHER GEAR... My February 17 message showed truckers leading the rebound in transportation stocks (with airlines right behind). It also showed C.H. Robinson Worldwide (CHRW) to be the trucker leader. It still is. Chart 9 shows the stock trading well above its moving average lines, and nearing a test of its fourth quarter high. Its relative strength ratio (top of chart) has already cleared that barrier. Chart 10 shows Old Dominion Freight Line (ODFL) also clearing its 200-day average and a resistance line drawn over its 2015 peaks. Its relative strength line (top of chart) has done the same. J.B. Hunt Transport Services (JBHT) may be next. Recent strength in economically-sensitive transportation stocks is a good sign. I wonder if recent buying of commodity-dependent rails and truckers is also a sign that the commodity depression may be ending.
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Chart 9
