A healthy rotation is underway across equity markets.
Leadership has swung toward cyclical value-oriented names over the trailing two weeks. Small-cap Energy, Materials, and Financials are outpacing the year-to-date top performers (Large-cap Tech). It’s a clear expansion in participation and a hallmark characteristic of any bull market.
But if cyclical stocks have a chance at participating over the long haul, we want to witness similar strength from corresponding commodity markets.
And we are…
Check out rebar futures posting a potential failed breakdown:
The bounce in rebar fits with the strength in small-caps and Emerging Market equities. If industrial metals such as rebar start catching higher, procyclical commodities and their related stocks likely follow suit…
What about Dr. Copper?
Copper futures are also reclaiming a crucial former support level after undercutting their August pivot highs last month.
This tactical upside resolution highlights a significant development for stock and commodity bulls.
For those who trade copper futures, I like it long toward the Jan. high at roughly 4.25 as long as it holds above 3.78.
More importantly, Copper's bid is incredibly bullish from an intermarket perspective. Copper’s resilience speaks to economic health that bodes well for equities all around the world.
It’s almost impossible to miss the risk-on tone spreading across the market. What started off as a lonely rally for tech and growth names is quickly turning into a trend cyclical sectors can enjoy. And burgeoning strength among industrial metals supports this broadening participation.
Stay tuned!
COT Heatmap Highlights
- Commercial hedgers hit a record-long position in Palladium.
- Commercials hold their largest short position for Live Cattle in three years.
- And commercials hold their largest short position for Feeder cattle in history
Click here to download the All Star Charts COT Heatmap.
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