ALUMINUM, COPPER, AND STEEL STOCKS HAVE A STRONG DAY -- LEADERS ARE CENTURY ALUMINUM, SOUTHERN COPPER, NUCOR AND US STEEL -- THAT'S A POSITIVE SIGN FOR STOCKS AND NEGATIVE FOR BONDS
CENTURY ALUMINUM LEADS THAT GROUP HIGHER... Aluminum stocks are leading a rally in the materials group. Chart 1 shows the Dow Jones US Aluminum Index surging to the highest level in eighteen months. Chart 2 shows Century Aluminum (CENX) looking pretty much the same. Alcoa (AA) is also having a strong day. Copper and steel stocks are also having a strong day.
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Chart 1
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Chart 2
SOUTHERN COPPER LEADS THAT GROUP HIGHER... Copper stocks are also rebounding within the context of a rising trend. Chart 3 shows Freeport-McMoran (FCX) finding support near its 50-day average. Its relative strength ratio (above chart) remains positive. The standout performer in that group is Southern Copper (SCCO). The weekly bars in Chart 4 show that stock rising to the highest level in nearly four years. Its relative strength ratio (top of chart) is also turning up for the first time since 2013. That's a positive bet on the direction of copper prices. The same is true of steel.
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Chart 3
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Chart 4
NUCOR AND US STEEL BOUNCE OFF 50-DAY LINES... Chart 5 shows US Steel (X) surging 8% today off its 50-day average. Chart 6 shows Nucor (NUE) also finding support at its rising 50-day line. Their relative strength lines (above charts) remain positive as well. Both stocks have experienced normal pullbacks over the past month, and appear to be regaining upside momentum. Both stocks also remain well above previous peaks hit last summer. Since rising industrial metals usually signal economic growth and inflation, that would seem to favor stocks over bonds. It also favors a higher dollar. Recent pullbacks in bond yields and dollar have coincided with sideways movement in stocks over the past month. That suggests to me that the Trump reflation trade is just pausing. Strong industral metal stocks is one of the reasons why. Technical odds continue to favor resumption of uptrends in bond yields, the dollar, and stocks that started post-election.
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Chart 5
