The optimal period to purchase equities and exchange traded funds in the metals and mining sector is here. Canadian investors have a wide variety of choices for a seasonal trade depending upon their risk/reward parameters.
The optimal period to own metals and mining stocks and exchange traded funds that track the S&P Metals and Mining Index is from November 19 to January 6. Average gain per period during the past 20 years was 8.56 per cent. Positive results were recorded in 75 per cent of the seasonally strong periods. The S&P/TSX Global Metals & Mining Index has gained a similarly upbeat 12.41 per cent over the past 10 years with positive results recorded in eight of those periods.
The period of seasonal strength is related to the pickup in demand for base metals during a strong period for manufacturing and industrial production, which increases into the spring months. Increased manufacturing ties in with the spring buying season for new homes, automobiles, and household furnishings, resulting in strength in the retail industry between January and April. Manufacturing activity, as gauged by the ISM Manufacturing Index, is currently at the highest level since May of 2011 and has been consistently in expansion territory since July of last year.
What about this year? The S&P/TSX Global Metals and Mining Index has an improving technical profile. The index at 716 has been forming a base building pattern between 654.09 and 724.28 during the past two months. A move above 724.28 will complete the pattern and confirm start of the period of seasonal strength. The benchmark recently moved above its 20-day moving average. Short-term momentum indicators (i.e. daily stochastics, relative strength index and moving average convergence divergence) recently began trending higher.
Several exchange traded funds tracking the S&P/TSX Global Metals and Mining Index are available for investment. iShares offers the S&P/TSX Global Mining ETF (CMW). BMO Exchange Traded Funds offers the S&P/TSX Equally Weighted Global Base Metals ETF (ZMT). Horizons offers the double leveraged BetaPro S&P/TSX Global Base Metal Bull Plus ETF (HMU)
Investors also can choose to own individual equities or baskets of equities in the sector that are part of the S&P/TSX Global Metals and Mining Index. U.S. listed choices include BHP Billiton, Rio Tinto and Freeport McMoran Copper & Gold. Canadian listed choices include Teck Resources, First Quantum Minerals, Alcoa, Barrick Gold, Lundin Mining and Hudbay Minerals.
Disclaimer: Comments, charts and opinions offered in this report by TimingTheMarket.ca and EquityClock.com are for information only. They should not be considered as advice to purchase or to sell mentioned securities. Data offered in this report is believed to be accurate, but is not guaranteed. Don and Jon Vialoux are Research Analysts with Horizons ETFs Management (Canada) Inc. All of the views expressed herein are the personal views of the authors and are not necessarily the views of Horizons ETFs Investment Management (Canada) Inc., although any of the recommendations found herein may be reflected in positions or transactions in the various client portfolios managed by Horizons ETFs Investment Management (Canada) Inc.