Heavy Metal Over Base Metals These Days
As you all know, the major stock indexes have soared over the past week. The Dow Jones Industrial Average (DJIA), the NASDAQ Composite, and the S&P 500 Index have all surged sharply higher recapturing their daily chart 50 moving averages. Whenever an index can recapture an important moving average that is usually a sign of short term strength. Here is the problem with this recent rally if we can find one. The base metals still remain very weak.
Leading base metal stock such as Freeport McMoRan Copper & Gold Inc (NYSE:FCX), Southern Copper Corp (NYSE:SCCO), and Cliffs Natural Resources Inc (NYSE:CLF) have not even come close to their daily chart 50 moving averages on this recent bounce. This tells us that the leading base metal stocks are still signaling weak relative strength in the near term. Often, when the U.S. Dollar Index plummets or declines these stocks will surge sharply higher. That has not been the case as the U.S. Dollar Index futures (DX Z1) have fallen sharply over the past week. Until the base and industrial metal stocks show improved relative strength these stocks remain vulnerable to further declines. Right now it is better to remain cautious on these base metal stocks.