SILVER AND STEEL STOCKS CONTINUE TO SURGE -- STEEL LEADERS INCLUDE RELIANCE, STEEL DYNAMICS, AND NUCOR -- FREEPORT MCMORAN LEADS MATERIALS -- CHINESE STOCKS LEAD EMERGING MARKETS HIGHER -- JP MORGAN LEADS BANKS AND FINANCIALS HIGHER
GLOBAL X SILVER MINERS ETF CONTINUES TO SOAR... My market message from March 7 showed major upturns in industrial and precious metal mining stocks. I made the point that silver stocks were doing better that gold miners. That was due to the fact that silver is both an industrial and precious metal. It was benefiting from a rise in precious metals (like gold). Most of its gains, however, appear to be coming from its more economically-sensitive role as an industrial metal. That view is supported by rallies in aluminum, copper, and steel producers. And there's no sign of that rally ending. Chart 1 shows the Global X Silver Miners (SIL) ETF surging to the highest level in fifteeen months. The 50-day average has crossed over its 200-day line (a "golden cross") which is bullish. The SIL/SPX ratio (top of chart) has been surging since January. Since the middle of January, the silver shares gave gained 89% (versus a 72% gain in gold stocks). Silver leaders include Pan American Silver (PAAS), Coeur D Alene Mines (CDE), Hecla Mining (HL), Silver Wheaton (SLW), and Silver Standard Resources (SSRI).
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Chart 1
STEEL STOCKS CONTINUE TO SURGE... My market message from March 7 showed the Market Vectors Steel ETF (SLX) clearing its 200-day moving average to turn its trend higher. It's done a lot better since then. The daily bars in Chart 2 show SLX having climbed to the highest level in ten months. Since its January bottom, the SLX has gained 80% which is reflected in its rising relative strength line (top of chart). Steel stocks got a big boost in March from a jump in the price of iron ore (which is used to make steel). They're getting another big boost today on another jump in the price of iron ore in China and stronger economic data from that country. Two of the steel leaders shown in a March 2 message included Reliance Steel (RS) and Steel Dynamics (STLD). Chart 3 shows Reliance nearing a test of its early 2014 high. Chart 4 shows Steel Dynamics trading at the highest level since 2014. My March 7 message added Nucor (NUE) to the steel leader board. Chart 5 shows Nucor having a strong year as well. All three have bullish moving averages and rising relative strength lines.
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Chart 2
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Chart 3
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Chart 4
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Chart 5
FREEPORT MCMORAN LEADS XLB IN BULLISH BREAKOUT ATTEMPT... Yesterday's message showed the Materials Sector SPDR (XLB) moving up to challenge its fourth quarter high. The daily bars in Chart 6 show the XLB trading over that resistance barrier in afternoon trading. That would constitute a bullish breakout in that commodity-oriented ETF. As was the case yesterday, Freeport McMoran (FCX) is leading the XLB higher. Chart 7 shows FCX trading decisively above its 200-day average for the first time since 2014 on higher copper prices. [Copper is rising today on news of higher China imports of that metal]. The rally in commodity assets is good news for global stocks because it implies economic strength. It also suggests that the deflationary threat from falling commodity prices has passed. That will also be good news to central bankers who have been trying hard to create some inflation. It's also good for markets tied to commodities in developed and emerging markets. A strong Chinese stock market is also lifting the mood among commodity traders.
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Chart 6
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Chart 7
CHINA LEADS EMERGING MARKETS HIGHER... Stronger economic news out of China is giving a big boost to its stock market. Chart 8 shows HongKong iShares (EWH) trading over its 200-day average for the first time since last August. Chart 9 shows Emerging Markets iShares (EEM) doing the same. China is the biggest country in the EEM and the day's strongest stock market. Since China is the world's biggest importer of commodities, a stronger Chinese market is good for that asset class. And stronger commodities are good for emerging markets.
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Chart 8
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Chart 9
J.P. MORGAN HELPS LEAD FINANCIALS HIGHER... Financials are the day's strongest sector and are being led higher by banks. J.P Morgan Chase (JPM) is the first big bank to report first quarter earnings and beat estimates this morning. JPM is the country's largest lender by assets. Chart 10 shows its stock gapping 4% higher on rising volume. That puts it in position to challenge its 200-day line. Other banks are reporting later in the week and there's lots of room for upside surprises. Banks may also be benefiting from the surge in commodity assets. Higher inflation usually leads to higher bond yields which are good for banks. Rising energy and mining stocks also reduce concerns about loans made to those groups when prices were falling. Brokers and life insurers are also having a strong day. A stronger financial sector provides another tailwind for the stock market.
