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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:

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:

Indicator

Jan 27th close

Feb 3rd close

Gain

Gain %

TSX Venture

1630

1667

37

2.26%

S&P 500

1317

1343

26

1.97%

Silver

33.90

33.7

-.20

-.589%

Gold

1733

1730

3

.173%

SIL ETF

24.80

24.95

.15

.06%

HUI

548

540

-8

-1.45%

GDX ETF

57.18

56.27

-.91

-1.59%

GDXJ ETF

29.80

29.58

-.22

-.73%

COPX ETF

15.22

15.76

.54

3.54%

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.

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.

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.

Disclaimer: The information and opinions contained within this document reflect the personal views of the author and should be viewed as food for thought and amusement only. The author may from time to time have a position in any of the securities mentioned. There are no guarantees of the accuracy, reliability or completeness of the information contained herein. Independent due diligence and discussions with one's own investment and business advisor is strongly recommended. These writings are not to be construed as an offer or solicitation with respect to the purchase or sale of any security or as an endorsement of any product or service. We do not request or receive compensation in any form in order to feature companies in this publication. It is prohibited to copy or redistribute this document to any type of third party without the express permission of the author. This document may be quoted, in context, provided proper credit is given.

Source: Higher Prices for Resources Stocks Ahead