COPPER PRICES ARE RISING -- SO IS THE GLOBAL X COPPER MINERS ETF -- S&P METALS & MINING ETF IS BEING HELD BACK BY GOLD, SILVER, AND STEEL STOCKS -- MSCI GLOBAL METALS AND MINING ETF OFFERS EXPOSURE TO STRONGER FOREIGN MINERS

COPPER PRICES ARE REBOUNDING ... After rising to the highest level in three years a month ago, the price of copper experienced a modest correction during September. Chart 1 shows the metal pulling back to initial chart support along its August low and its 50-day moving average. But it's bouncing again. The metal is up nearly 3% today and showing signs of resuming its uptrend. That's giving a big boost to copper miners like Freeport McMoran (FCX) and Southern Copper (SCCO). It's also boosting the Global X Copper MIners ETF (COPX).

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Chart 1

COPPER MINERS ETF IS ALSO RISING ... The daily bars in Chart 2 show the Global X Copper Miners ETF (COPX) also rebounding today. Like the price of copper, the COPX hit a three-year high at the start of September before experiencing some profit-taking. It also stabilized above chart support at its August low. It rebounded enough this week to push it back above its 50-day average. The COPX/SPX ratio (top of chart) is rebounding as well. Although copper stocks are the biggest gainers in the materials sector today, aluminum and steel stocks are also trading higher. That warrants a closer look at a couple of ETFs that offer exposure to a basket of mining stocks.

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Chart 2

S&P METALS AND MINING SPDR IS UP, BUT NOT AS MUCH... The daily bars in Chart 3 show the S&P Metals and Mining SPDR (XME) in an uptrend since June. The XME has gained 9% since the start of year (versus a 32% gain in the COPX). There are a several reasons why the XME has been a relative laggard. One reason is that it has a 48% weight in steel stocks (which are up 15% in 2017). That explains why the XME is so closely correlated to the VanEck Vectors Steel ETF (SLX). That's the solid line in Chart 3. The visual correlation between the two metal ETFs is supported by a 60-day correlation of .86. By contrast, the XME gives much smaller weights to aluminum stocks (11%) and copper (4%). They've been the two strongest metal groups in 2017. It also includes gold and silver stocks which have been relative laggards. That has also hurt XME performance.

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Chart 3

GOLD AND SILVER STOCKS HAVE ALSO HELD XME BACK... Chart 4 shows how various metal ETFs have performed over the last twelve months. Copper stocks (COPX) have led with an annual gain of 58%. Steel (SLX) is second (41%). The XME is third (26%). Precious metals, however, have been notable laggards. The two bottom lines in Chart 4 shows the VanEck Gold Miners ETF (GDX) with a 12-month loss of -11%. The Global X Silver Miners ETF (SIL) lost -21% over the last year. And they account for 17% of the XME. That's more than copper and aluminum stocks combined. There's another problem with XME. It includes only U.S. mining stocks. That excludes a lot of foreign miners that have actually been much stronger. Fortunately, there's a mining ETF that offers exposure to those foreign miners.

Chart 4

PICK OFFERS EXPOSURE TO FOREIGN MINING STOCKS... Chart 5 shows the MSCI Global Metals & Mining Producers iShares (PICK) in a strong uptrend. So far this year, PICK has gained 26% (which is nearly triple the 9% gain in the XME). Here's why. Nine of the ten biggest mining stocks in PICK are foreign. And the biggest five are having a strong year. Chart 6 plots those five in order of relative strength for the year. That includes Vale (+40%), Rio Tinto (34%), Glencore (33%), Anglo American (27%), and BHP Billiton (20%). Freeport McMoran is the only U.S. miner in the top ten by size (with a 2017 gain of 12%). The U.S. accounts for only 11% of PICK. Australia has the biggest weighting (25%). The line on top of Chart 6 is a relative strength ratio of PICK divided by the more domestic XME, and shows that PICK has been the stronger performer by far this year. That's a strong argument for choosing a mining ETF with foreign exposure. One more thing. PICK includes miners of precious metals, but excludes gold and silver. Gold doesn't do as well when interest rates and stocks are rising (along with the dollar). The fact that money is flowing again into industrial miners may also be part of the reflation trade and is a good sign for the global economy.

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Chart 5

Chart 6