Copper watch...

Last Friday's Jobs Report send bearish ripples through the market, but the real news for February wasn't the jobs report, it was the breakout in copper prices. Many will cite weakness in the dollar as the cause for the surge in commodity prices but this is too simplistic an argument. The following chart shows copper prices priced with respect to the Euro index:



Why copper? As a key industrial metal for technology stocks (semiconductors in particular) it is an important measure for early economic expansion. From October through to early February demand for the metal declined as economic conditions deteriorated. However, February saw the start of a recovery over and above a simple decline in weakness for the dollar.

If the copper:euro ratio can crack past 2.68 I reckon any chance of a recession will go kaput and it will mark a firm bottom for the markets. Markets discount economic conditions by 6-9 months, so Friday's data was priced in long before it was reported. Breadth indicators are in deep oversold territory, and Barry Bears are revelling in the meltdown so one has to ask, who is left to short? Who is left to sell who hasn't sold already?

Now is not the time to be throwing the hands in the air, now is a time to be rotating out of the underperformers into stocks which will lead this market out. Financials and Technology is where the action will be...

Digg this / Stumble it / Add me to your feed readers, I'll keep you posted.

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Coeur D Alene Mines (CDE)

Coeur D Alene Mines (CDE) had initially featured as a blog stock pick for December of last year. The Technical picture has improved considerably, although the gold miners have not enjoyed the same exponential growth as seen in base metal prices (this is bearish for the base metal as stocks lead commodities with respect to performance). Given there is a reasonable chance of a breakout failure one could use Monday's move as an opportunity to raise the stop for the December 'Buy'.


The point-n-figure chart has a new price target of $9.25 from the December 17th target of $7.75. The chart is nicely set for a triple top breakout if it can make it to $5.50 (an additional 'Buy' trigger).


On the options front the January 2009 $2.50 calls currently trade at $2.90 from the ask (up $0.85 from December), with the $5.00 calls at $1.20 (up $0.30 from December).

Monday's gains came courtesy of earnings.

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Anyone for coffee?

In an article I wrote back in April 2006 I had talked a little about the expectations for soft commodities. My outlook at the time for coffee and cocoa where overshadowed by the subsequent rallies in the grains (corn in particular). However, taking another look at the long term chart for coffee there is an almost picture-perfect breakout from a cup-and-handle pattern for February with a 1996 price high of $300+ to aim for:



Factor in growing demand from China (via Maoxian) and you have a nice recipe for future growth. Any supply problem from a crop failure would really set the cat amongst the pigeons.

I did a quick search for stocks with coffee in their title and came up with the following: CBOU, DCFF, DDRX, GMCR, GWDC, JVA, PEET, SWS/UN.TO. Unfortunately, for companies like Peet's, Caribou's, and Starbucks, rising coffee prices will hurt these stocks.

The London Stock Exchange has a Coffee ETF (COFF), but I couldn't find something comparable for the U.S. market (???).

I wonder what the next 12 months will bring?

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