MINERS HAVE ANOTHER BIG DAY -- ETFS TIED TO MINING AND PRECIOUS METALS CLEAR 200-DAY LINES -- STEEL STOCKS BENEFIT FROM RECORD JUMP IN IRON ORE -- ADD NUCOR TO LIST OF STEEL LEADERS -- PAN AMERICAN LEADS SILVER STOCKS HIGHER
METALS AND MINING SPDR CLEARS 200-DAY AVERAGE ... Precious and base metal stocks are continuing their strong rally on the back of rising commodity prices. Chart 1 shows the S&P Metals and Mining SPDR (XME) trading above its 200-day average and at the highest level in five months. Its relative strength ratio (solid area) has been surging as well since the start of the year. Precious metal leaders include gold, silver, and platinum stocks. Base metal gains include aluminum, copper, and steel. Several recent messages have highlighted some of those gains in recent weeks. Last Wedneday's message focused on the sharp upturn in steel stocks. They're helping lead today's rally in metal stocks. A 19% jump in the price of iron ore is giving a big boost to steel stocks on hopes for more stimulus from China and a cutback in Chinese steel production. Iron ore is used in making steel.
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Chart 1
MARKET VECTORS STEEL ETF CLEARS 200-DAY LINE... The black bars in Chart 2 show the Market Vectors Steel ETF (SLX) trading above its 200-day line for the first time since 2014. Its relative strength line (gray area) has surged as well. Last Wedneday's message showed three steel leaders clearing that resistance line, including AKSteel (AKS), Steel Dynamics (STLD), Reliance Steel (RS). Chart 3 shows Nucor (NUE) joining that group in a new uptrend.
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Chart 2
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Chart 3
GOLD AND SILVER STOCKS SURGE ... Gold and silver stocks are participating in the commodity surge. Chart 4 shows the Market Vectors Gold Miners ETF (GDX) reaching a ten-month high, and breaking a two-year down trendline in the process. The GDX/SPX ratio (top of chart) shows new market leadership. Silver stocks are also doing well. Chart 5 shows the Global X Silver Miners ETF (SIL) trading at a nine-month high and well above its 200-day line. The SIL/SPX ratio (top of chart) has bottomed as well. Chart 6 shows Pan American Silver (PAAS) already at a new 52-week high. Other silver leaders include Coeur D Alene Mines (CDE), Hecla Mining (HL), and Silver Wheaton (SLW). The rally in silver is noteworthy since it's both a precious and an industrial metal. The same is true of palladium and platinum which are used in the making of autos. That suggests that the precious metal buying is more than just a safe haven play. It also fits into gains in other base and industrial metals and the commodity complex in general. That should be good news for the global economy and especially for commodity exporters.
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Chart 4
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Chart 5
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Chart 6
AUSSIE DOLLAR AND STOCKS TURN UP ... Last Wednesday's message also showed upturns in the Aussie and Canadian Dollars, and suggested that would be good for their respective stock markets. Their currencies and stocks are closely correlated to commodity prices. Chart 7 shows the Aussie Dollar ($XAD) having since broken out to the highest level in eight months. One reason for that is because iron ore is Australia's biggest export (most of which goes to China). That's boosting Aussie stocks as well. Chart 8 shows Australia iShares (EWA) on the verge of an upside breakout of its own after clearing its 200-day average. The rising XAD adds to the appeal of the EWA. The Australian market should benefit from an upturn in commodities. So should Canada.
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Chart 7
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Chart 8
CANADIAN STOCKS TURN UP ... Chart 9 shows the Toronto TSX Composite Index ($TSX) reaching three-month high and heading toward its 200-day average. Because of its close ties to falling commodity prices, the TSX has underperformed U.S. stocks over the last five years. That may be starting to change. The TSX/SPX ratio (top of chart) has been rising since December. [Canada is more heavily dependent on oil]. Longer range charts may also be suggesting a bottom in Canadian stocks.
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Chart 9
CANADA RALLIES OFF SUPPORT... The weekly bars in Chart 10 show the Toronto Stock Index (TSX) bouncing off major chart support along its 2011/2012 lows (after losing 26% of its value). The green Fibonnaci lines show that it has also retraced 50% of its 2009/2014 uptrend, which usually acts as a important support level. The 14-week RSI line (top of chart) has climbed above 50 after bouncing off oversold territory at 30. Its weekly MACD line (below chart) have just turned positive for the first time in a year (and from the same level as their 2011 upturn). Those are all signs of a bottom in the making. That would be consistent with a bottom in commodity prices which is looking more likely. A commodity bottom is already boosting commodity-producing emerging markets in Brazil, Mexico, South Africa, and Russia. All of which should be positive for global stock markets and their respective economies.
