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On Monday all of the buzz surrounded the S&P 500's breakout above the 1,130 trading-range high. After all, the U.S. benchmark had visited the 1,040 level -- the low end of the range -- three times in late August alone.

Yet there has been scant recognition that a base of stock support began back in July. What's more, there has been even less recognition that the best-built floor came back in May, when emerging markets had bottomed. Not only did single country emergers turn it around in May, but regional emerging markets turned it around in May as well.

Why does the emerging market turnaround that started several months before the U.S. upswing matter so much? It all comes down to the global industrial cycle; and that means it largely comes down to commodities.

When China and India demonstrated an increased demand for natural resources back in May and June, belief in the global growth cycle accelerated. You began seeing "higher lows" for emerging stocks. Shortly thereafter, you began seeing "higher lows" for U.S. stocks. Afterward, 52-week highs became the norm for resource-rich developing nations as well as the actual commodities themselves. And now you're beginning to see developed nations play catch-up to emergers, just as they did in 2008 and last year.

If you're swift, maybe you'll get in on a temporary period of outperformance for the developed world. It won't last, though. Japan has needed to interfere in the currency market. Europe is a long way from solving its ongoing sovereign debt issues through quasi-austerity. And the U.S. can't shake the banking and housing flu as easily as it would like.

It follows that, in assessing longer-term market direction for emerging stock assets as well as domestic stock assets, investors would be wise to track the relative strength and percentage performance of key commodities. For instance, the relative strength of ETNs for copper, agriculture and nickel are all at their highest respective three-month percentile rankings.

In some ways, this could be viewed as a net positive. In other ways, Monday's bullishness for U.S. and European equities significantly outpaced resource-rich countries, the materials sector and commodities themselves. If that becomes more than a one-day or a five-day phenomenon, a longer-lasting "breather" for commodities could be on the horizon.Some popular Commodity ETNs to consider: The

iPath DJ Agriculture

(JJA) - Get Free Report


iPath DJ Nickel

(JJN) - Get Free Report


iPath DJ Copper

(JJC) - Get Free Report


iPath DJ Industrial Metals

(JJM) - Get Free Report

iPath DJ Total Commodity

(DJP) - Get Free Report

; and

S&P 500 SPDR Trust

(SPY) - Get Free Report


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