Zinc's a Link for Traders Who Think

Let's take zinc, a metal used in brass alloys and for galvanizing steel. It's about as pedestrian as you can get, but its ability to lead 10-year note yields is formidable. Since 1988, zinc has gotten it wrong only once, and that was during early 1997, just prior to the Asian crisis that defined so much of our recent financial history.

The principle is disarmingly simple -- higher zinc demand means stronger industrial activity. Stronger credit demands and higher interest rates ensue. No razzle-dazzle, and that's just fine with me.

Notes Galvanized Into Action

Source: CRB Infotech

At present, zinc prices have stopped falling, which is damning by faint praise. Do any of the other base metals have anything to say about where economic activity is headed?

Metals Not Out of the Woods

Nothing is more infuriating than a nonanswer from a nonperson, and yet that is what the metals markets are providing us with right now. Just like stocks, they rallied from low points in early October and hit resistance in early December.

The pattern is the same from generally quiet lead and tin to the always-volatile nickel to industrial workhorses copper and aluminum. None of these metals appears in any danger of turning sharply lower, but none of them has been able to sustain any sort of rally, either.

Not Moving Higher

Source: Bloomberg

Metal Stocks No Help, Either

If metals prices themselves won't cooperate with our forecasting needs, will the stocks of metal producers be any more cooperative? Let's take a look at two of them, the aforementioned Alcoa (AA Quote - Cramer on AA - Stock Picks) and copper producer Phelps Dodge(PD Quote - Cramer on PD - Stock Picks), to see whether they have been able to outperform the broad market recently.

No Hints From Metals Stocks

Source: Bloomberg

We're back to the same half-empty/half-full conundrum. Both of these stocks have outperformed the broad Russell 3000 since the October low, but not by much. Worse, they've backed off from the October-December rally more quickly than has the market as a whole.

« Previous Page

1 2 3

Next Page »