Higher Prices for Resources Stocks Ahead

Feb. 6.12 | About: Global X (JUNR)

It has been over one week since my previous article laid out the case for silver stocks. In re-examining the chart that I displayed with that article, there were some surprises for me. The new chart, as of Friday February 3, 2012, is below:Click to enlarge

The green-red TSXV ETF trace is used as a proxy for the TSX Venture exchange, and this is compared with the blue trace for the SPY ETF as a proxy for the S&P 500 and the white trace is the SLV ETF as a proxy for the price of silver. As can be seen above within the pink rectangle, all three have moved higher this past week. However it quite distinctly shows that even though both silver and the S&P 500 moved higher for the week, the star performer was the TSX Venture. I knew that the Venture was dependent upon the lead of both the S&P 500 and the silver price, but I was wondering what was behind the out performance, so I investigated further.

To research further, I found the numbers for various indicators for the week and they are displayed in the following table:


Jan 27th close

Feb 3rd close


Gain %

TSX Venture





S&P 500








































Click to enlarge

Silver moved .5% lower for the week while Gold moved .7% higher. The silver equities in the SIL ETF declined .06% for the week. Also, the HUI index of large cap gold miners, the GDX ETF of large gold miners and the GDXJ ETF of junior gold miners all declined for the week. Why were the silver and gold miners declining, while the silver and gold prices stayed almost even? Also, most importantly was why was the TSX Venture index higher if the gold and silver miners were declining.

By chance, I looked the COPX ETF of copper miners. (ETF holdings listed following)

Data as of 2012-01-05COPX Top Ten Holdings:

  1. Quadra FNX Mining Ltd. (OTC:QADMF): 6.70%
  2. Inmet Mining Corporation (OTC:IEMMF): 5.61%
  3. Antofagasta PLC (OTC:ANFGF): 5.19%
  4. Southern Copper Corporation (NYSE:SCCO): 5.16%
  5. Grupo Mexico, S.A.B. de C.V. (OTCPK:GMBXF): 5.06%
  6. Lundin Mining Corp (OTCPK:LUNMF): 5.03%
  7. Kazakhmys PLC (NYSEMKT:KAZ): 4.88%
  8. Freeport-McMoRan Copper & Gold B (NYSE:FCX): 4.67%
  9. First Quantum Minerals Ltd. (NYSEARCA:FM): 4.62%
  10. HudBay Minerals, Inc. (NYSE:HBM): 4.60%
  • % Assets In Top 10: 51.52%
  • Total Holdings: 32

See source.

The astonishing result is that the COPX has gained 3.54% for the week. This seems to make intuitive sense, as the copper metal is well known as the leading indicator of global economic health. It would make sense that if the economic growth was going to be strong for the world, that the copper price should lead by rising higher and that the copper miners would appreciate as well.

Following is the COPX ETF plotted against the TSXV ETF for the time period of interest from October of 2011.

Click to enlarge

The orange trace of the COPX ETF matches and correlates quite well with the TSXV ETF candlesticks.

Checking further, I plotted the copper price versus the COPX ETF in the following chart over the last 18 months.

Click to enlarge

The chart above shows the black trace of the copper price and the candlesticks of the COPX ETF. Clearly the COPX correlates with the copper price, and even though the price has taken a dip in recent weeks, the COPX is moving higher. But the most important take-away from the above chart is that both copper and the COPX are in an up trend and have been since October 2011.

In summation, I can say that this bodes very well for material resources stocks and also the small cap junior resources stocks listed on the TSX Venture exchange.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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