Setups in Materials

In a recent post (link), I discussed the massive breakouts in global stocks. Countries/Regions like Canada, Europe, and Japan are coming out of 3-20 year long bases. On top of that, foreign stocks have been outperforming US stocks, with the SPY:VEU ratio breaking down.

Foreign stocks (and small-caps) tend to be overweight value / cyclical stocks. For example, 70% of Canada’s TSX index is in banks, energy, materials and industrials.

In this post, I want to show one of the areas that’s been partly fueling the outperformance in foreign stocks. That’s the materials sector. Take a look at the performance of Copper, Steel, Lithium and Rare Earth producers over the past year compared to global stocks:

To be clear, when I say ‘materials’, I’m not talking about Gold which is more tied with real bonds. SGDJ (Junior Gold miners ETF) made a false breakout recently. I wrote about this here.

Let’s take a look at the setups in various materials ETFs:

  1. LIT came out of a decade long base a couple months ago.

  1. COPX is just coming out of a 7-year base

  1. SLX. Again, a fresh breakout from a decade-long base.

Yes, part of the reason why these ETFs have been ripping is the increased demand/market in Electric Vehicles and Solar Panels. But I will be writing a post soon about the larger seismic shift that’s happening in the market that’s seeing new leadership in foreign stocks, small-caps, value and cyclicals. This is tied to higher global growth & long bond yields. Stay tuned.