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A Big Buy Signal for the Commodity Complex

By Matt Badiali, editor, S&A Resource Report
Wednesday, October 6, 2010

As you read this, copper is in the midst of an incredible turnaround.
 
Early this year, I was a big skeptic on the copper market. Prices had enjoyed a huge run higher... and I was concerned about huge potential stockpiles in China depressing the price.
 
For a few months this summer, this looked like the right outlook. Copper plummeted 20% from a high of around $3.50 per pound to $2.75. The big copper miner Freeport McMoRan fell more than 30% during that time.
 
But it's amazing what government stimulus can do.
 
As you can see from the chart below, copper has skyrocketed off its summer lows to a new two-year high. Commodities in general, led by copper, are benefiting from continued government-sponsored growth in China. Some analysts believe the government there is set to embark on another huge round of infrastructure building.
 
 
 
There is so much demand returning to the copper market, the International Copper Study Group says refined copper output will fall below demand for the first time since 2007. It looks like high copper prices could be around for the long term.
 
At this point in copper's uptrend buying a miner like Freeport McMoRan is essentially a momentum trade. Sure, you can make some solid gains if the price continues to head higher, but you're not getting a screaming deal like you were getting near copper's $1.50 bottom back in early 2009.
 
I think the main thing to take away from copper's incredible surge is that for now, the market is saying the wind is blowing in favor of global economic growth. This is bullish for almost all commodities, like oil, natural gas, coal, silver, and copper.
 
For the "trend traders" out there, that means being long a Freeport McMoRan or oil stocks. For you contrarians out there looking for cheap assets, uranium and natural gas are near yearly lows. With copper prices showing so much strength, both camps are likely to do well in the next year.
 
Good investing,
 
Matt Badiali




In The Daily Crux Recent Articles
Market Notes
Gold explodes higher, breaking above $1,340 to set new record high.
 
U.S. dollar continues plummeting, near nine-month low.
 
Copper miners Freeport McMoRan and Southern Copper jump to new 52-week highs.
 
Earnings today... Monsanto (seeds & Roundup spray), Costco (big discount stores), Marriott (hotels).
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1159.97 -0.1% +10.0%
Oil 36.28 +0.5% -0.7%
Gold 131.81 +0.6% +28.9%
Silver 22.69 +1.6% +32.9%
US-Dollar 77.70 -1.2% +1.9%
Euro 1.39 +0.7% -5.3%
Volatility 21.49 -1.2% -16.4%
Gold Stocks 530.84 +1.6% +20.9%
10-Year Yield 2.40 -2.8% -26.2%

World ETFs
Symbol Price
Change
52-Wk
USA 116.03 0.0% +10.0%
Canada 28.90 +0.6% +14.0%
Russia 20.29 +0.2% +8.5%
India 37.98 +0.0% +27.5%
Israel 16.47 -0.3% +15.6%
Japan 10.14 +1.1% +4.0%
Singapore 13.66 +0.3% +28.6%
Taiwan 13.73 +0.8% +10.5%
S. Korea 55.97 +1.5% +22.1%
S. Africa 69.04 +0.3% +25.0%
China 44.24 -0.1% +6.5%
Lat.America 51.38 -0.9% +16.6%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 114.81 +0.0% -1.9%
Big Pharma 65.51 +0.2% 0.0%
Internet 63.42 -2.0% +25.3%
Semis 13.20 -1.4% +7.4%
Utilities 31.69 -0.5% +9.1%
Defense 17.49 +0.1% +9.0%
Nanotech 9.12 -1.1% -12.2%
Alt. Energy 9.84 +0.0% -7.2%
Water 16.85 +0.3% +2.7%
Insurance 15.50 -0.1% +12.7%
Biotech 19.76 -0.9% +16.9%
Retail 17.46 -0.6% +12.9%
Software 22.17 -2.6% +15.2%
Big Tech 49.23 -0.9% +17.4%
Construction 12.15 +0.0% +1.5%
Media 12.35 -1.8% +14.7%
Consumer Svcs 61.65 -0.5% +18.3%
Financials 53.27 -0.1% +1.4%
Health Care 63.57 -0.3% +8.6%
Industrials 58.95 +0.4% +18.5%
Basic Mat 67.00 +1.0% +22.4%
Real Estate 54.13 -0.3% +30.3%
Transportation 82.77 +0.4% +21.4%
Telecom 22.05 -0.8% +18.5%