Eoin Treacy's view

The CCI which is the unweighted Old CRB, fell from 700 in 2011 to a recent low above 400. It has at least steadied, not least because energy markets have stabilised and industrial metals have been exhibiting relative strength. The consistency of the fall from above 550 has now been broken, but a sustained move above the 200-day MA will be required to confirm more than temporary steadying.

I posted a ratio of the S&P/ASX 300 Resources Index relative to the S&P/ASX 200 in yesterday’s Comment of the Day because the sector is showing evidence of a return to outperformance.

This is relevant because it has been a laggard for so long and because the sector is so under-owned particularly relative to the banking sector in Australia.

This ratio of the FTSE-350 Mining Index relative to the FTSE-350 does not yet exhibit relative strength for the mining sector. A sustained move above 4 would be required to break the progression of lower rally highs and to signal a relative preference for mining shares.

On clicking through various lists of mining shares this is definitely still a stock-picker’s market. There are still a number of downtrends that remain consistent. However at this stage of the cycle it is more productive to highlight companies that exhibit relative strength. After all, leaders lead for a reason and miners that outperform in the current environment are probably less affected by the malaise that has affected the sector over the last number of years.

Boliden is an example. As a major zinc miner, the company side stepped the rout in iron-ore and coal mining operations. The share broke out of a four-year range in January, encountered resistance in the region of SEK200 from May 1st and is now in a process of mean reversion. Zinc prices have now also entered a process of mean reversion.

Canadian listed Hudbay Minerals, a zinc and copper miner, is currently testing the upper side of a three-year base. A sustained move below the 200-day MA would be required to question medium-term scope for a successful upward break.


In the iron-ore sector, Ferrexpo and Cliffs Natural Resources experienced the brunt of selling pressure in response to the collapse of iron-ore prices. Cliffs Natural Resources fell 96% from its 2011 peak near $100 to its recent low. Both are in the process of closing overextensions relative to their respective trend means but will need to sustain moves above them to signal returns to demand dominance beyond the short term.

Among steel producers Austrian listed Voestalpine is testing the upper side of a four-year range and while there is scope for some consolidation in this area, a sustained move below the 200-day MA would be required to question potential for additional upside.  

Among copper miners Southern Copper has been ranging mostly above $25 since 2011 and rebounded from that level again in January. It is now testing the $35 area and a sustained move above that level would signal a return to demand dominance beyond the short-term. The company’s Mexican listed parent Groupo Mexico is outperforming in nominal terms as a result of the Peso’s weakness.

Australian listed OZ Minerals’ downtrend lost consistency from late 2013 and has been forming a base above A$2 since. It is now testing the upper boundary and a sustained move above A$5 would help to confirm a return to demand dominance beyond the short term.

Among gold miners Kirkland Lake Gold is in the process of breaking out of a two-year base.