Commodity ETNs Suggest Economic Pickup

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (ETF Expert) -- Before it was fashionable to question the sustainability of worldwide GDP growth, I did exactly that. I questioned it.

It wasn't that I believed that developing economies were raising rates too rapidly. Nor did I insist that recovery in the developed world could only be explained by the accommodative policies of central banks. In essence, it was Dr. Copper that raised my eyebrows.

More specifically, the iPath DJ Copper(JJC) exchange-traded note peaked in mid-February. It fell below a 50-day simple moving average in March. It hit lower lows in four consecutive months from February through May, dropping as much as 17% from a February peak to a May floor. And it currently sits below a long-term 200-day moving average.

So why do I get the sense that things may soon change for the better? Since iPath DJ Copper hit a 2011 bottom in May, it has risen 5.5%. JJC has also shown a capacity to break through technical resistance to the upside. What's more, Bloomberg recently reported that copper stockpiling in China may have abated by 50% over the last two months, suggesting that the country will increase imports dramatically to keep up with its rapid growth needs.

And there's more. Goldman Sachs sees copper rising 20% from current levels. Similarly, many industrial metals in the iPath ETN stable have rallied off respective May lows.

For example, iPath DJ UBS Lead(LD) is up about 9.6% from its May lows, while Path DJ UBS Industrial Metals(JJM) is up about 3.1% and iPath DJ UBS Aluminum(JJU) is up about 2.2%.

As copper demand picks up, and as the demand for other industrial metals rises, emerging-market stocks should outperform developed-world stocks. Note that Vanguard Emerging Markets(VWO) has lost less than SPDR S&P 500 Trust(SPY) has since the metals ETNs hit lows in May.

The May-June swoon for stock assets could get uglier. And even though many of the metals come directly from the Periodic Table of Elements, this assessment hardly meets the rigors of scientific scrutiny.

Nevertheless, paying attention to Dr. Copper has served me well over the past 22 years. If iPath DJ Copper can break through technical resistance and stay above its 200-day moving average, one should expect resources-intensive emerging-market stock ETFs to follow suit. (Keep a watchful eye on iPath DJ Industrial Metals (JJM) as well.)

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