Tuesday, March 16, 2010

Commodities: They Just Rang a Bell at the Top "ETF First From First Trust: Platinum, Copper Miner ETFs" (FCX; RTP; SCCO)

Copper closed down 6 cents at $3.31 yesterday.
In an April 2007 post, "Indexes, ETF's and Global Warming" I said (emphasis added):
A few weeks ago Mark Gongloff had a post at the WSJ.com's EnergyRoundup with the cautionary title "Alternative Energy’s “Cover” Moment?". He ended the post with this humble line "And that could be one reason why the alternative-energy boom might continue for a while after all. Or at least, there’s a 50/50 chance of it."

Of all the "Cover Moments" the most infamous is the Aug. 13, '79 BusinessWeek "The Death of Equities" with the DJIA around 875. Paul Kedrosky has a great chart at Infectious Greed.

If you note that date, it was three years before the Big Bull started, with the Dow closing at 776.92 (I think; That day was a lifetime ago) on Aug. 12, 1982. My personal favorite cover moment was the Oct. 4 1999 BusinessWeek "The Internet Age". Both of these pale before Prof Irving Fisher's timing of his Sep. 4, 1929 statement "There may be a recession in stock prices, but not anything in the nature of a crash." (the DJIA had peaked the day before at 381, it would bottom at 41 in 1932), or his more famous Oct. '29 "...permanently high plateau".

All this history came welling up (from an admitedly strange mind) because of a line--"Cleantech: The New Biotech" that Richard Kang used a few months ago in a posting to Seeking Alpha: "Tree Huggers Unite! A Survey of Cleantech ETFs".

The Amex rolled out the BTK biotech index in October 1991 and a very astute trader told me that was a top, get flat or short of the biotechs. Good call-see chart. The biowrecks fell 50+% over the next three years....
I've been thinking about the chart on copper, here are a couple takes. First up, HardAssetsInvestor:
Can Copper Climb Higher?

Talk about a comeback. Since its March 2009 bottom, copper has risen more than 140 percent, with the May COMEX contract closing at $3.38/lb on Friday:

1-Year Copper Spot

Yet for the past two months, copper has stayed stuck in a trading range, volleying back and forth between $3 and $3.50/lb without any indication of permanent gains or losses. Not even the earthquake that struck Chile last month or its subsequent aftershocks could spark a breakout. Last Thursday's 6.9 quake, for example, didn't even register in the copper market, with prices remaining flat at $3.37/lb for the day.

So can copper resume its upward climb? Or is the metal just biding its time before a major pullback?

Deflating Chinese Demand

Copper, as you may recall, is one of the world's most widely used industrial metals, particularly in construction.....

And from Uncommon Wisdom:

copper Chart of the Day -- Copper

Yesterday we saw the headline announcement via ETF database:

First Trust, the ETF issuer best known for its line of quant-based AlphaDEX funds, introduced two new ETFs last week that tap into an increasingly popular investment strategy. The First Trust ISE Global Platinum Index Fund (PLTM) and First Trust ISE Global Copper Index Fund (CU) join a number of other ETFs focused on mining stocks, but are the first to specifically target these metals....
...CU will track the ISE Global Copper Index, a benchmark measuring the performance of public companies that are active in the copper mining industry based on analysis of revenue derived from the sale of copper. Components must be actively engaged in some aspect of the copper mining industry, such as copper mining, refining or exploration....MORE
Is it just me or did you just hear a clang, clang, clang?
We've been fans of the red stuff since March 12, 2009.
The scary thing is; You could overlay an SPX chart on copper and they are almost indistinguishable.
Here are some of our Cu posts:

Mar. 12, 2009
Gold & silver vs. copper & uranium

June 9, 2009
Copper Prices Rise as Dollar Slumps, Auto Sales Soar in China
So you don't think we're some cupric come lately, we posted "Gold & silver vs. copper & uranium" March 12, the week that Cu started a move which to date has resulted in 11 out of 13 up-weeks (it was also up in January and February but I had other fish to fry). Successive posts were...
Aug. 4,2009
Copper: Freeport-McMoRan Upgraded to Buy at Merrill Lynch/BAM. And: Copper in Structural Deficit?

Nov. 23, 2009
Commodities: "Dr. Copper: Still Rising, Despite Large Stockpiles"