Outlook Lifts Lead, Copper ETFs
TRANG HO, INVESTOR'S BUSINESS
Posted 09/13/2010 06:44 PM ET
metals ETFs rallied Monday after China said industrial
output in August jumped at a faster rate than expected.
production rose 13.9% year over year in August, up from
a 13.4% gain in July.
August exports grew 34.4% after expanding 38.1% in July.
Imports surged 35.2%, improving upon July's 22.7% growth.
export growth reflects a slowdown in global demand,
while a rebound in imports signals that China's economic
slowdown may be less severe than expected, says Ed Yardeni,
president and chief investment strategist at Yardeni
Dow Jones-UBS Lead ETN (LD),
the only exchange traded product for the heavy metal,
leapt 4.16% Monday to 56.42. LD is thinly traded but
has climbed 45% in the past three months.
in a longer-term downtrend that started in January,
when it peaked near 70. LD has formed a series of three
lower highs and two lower lows. It faces overhead resistance
at its prior highs of 57 and 61.
Dow Jones-UBS Copper ETN (JJC)
gapped up 2.3% Monday to 46.44. The fund closed 1% above
a 45.77 buy point in a four-month cup-with-handle base.
JJC rose 27% in the past three months and is close to
recovering its 52-week high of 49.51 set in April.
X Copper Miners (COPX)
and First Trust ISE Global Copper (CU)
both rallied almost 4% Monday. They track a basket of
copper-producing companies. CU's and COPX's charts look
similar. Both ETFs closed within 4% of a buy point in
a cup-with-handle base.
metal demand is driven by the country's continuing building
boom; as of July, 337,761 construction projects were
under way, an increase of 28,847 from the same period
last year," Matthew Circosta, an economist with
Moody's Economy.com, wrote in a report released Friday.
the pace of new development is slowing this year, it
will be gradual rather than a rapid deceleration, Circosta
says. "As China's expansion stabilizes at a lower
but healthier growth rate," he wrote, "and
fears of a double-dip recession recede in the U.S.,
metals demand and prices should remain strong."
another view. Shawn Hackett, president of Hackett Financial
Advisors, says prices are too high and industrial metals
are in a bubble, even though they haven't recovered
the levels seen before the 2008 commodity bust.
prices could fall 20% to 30% in the next 12 to 18 months
for two major reasons: (1) China's stimulus spending
and loosening of controls on bank lending have artificially
hiked demand for cars and housing — two major consumers
of industrial metals — and (2) the Commitment of Traders
report provided by the U.S. Futures Trading Commission
shows that speculators have piled into industrial metals,
betting that prices will go higher.
tend to be most optimistic at the top and most pessimistic
at the bottom," Hackett said. "When they're
record long, like they are now, they might all want
to get out at the same time."
New S&P ETFs
last week released a batch of S&P-index-tracking
ETFs that undercut their competitors.
S&P 500 (VOO)
will charge a negligible 0.06% annual expense ratio
vs. 0.945% for State Street Global Advisors'
SPDR S&P 500 (SPY)
— the largest ETF by assets — and 0.09% for iShares
S&P 500 Index (IVV).
ETF and mutual fund leader launched eight other ETFs
based on S&P's U.S. equities indexes: Vanguard
S&P 500 Value ([STOCK[VOOV]]), Vanguard
S&P 500 Growth (VOOG),
Vanguard S&P Mid-Cap 400 (IVOO),
Vanguard S&P Mid-Cap 400 Value
(IVOV), Vanguard S&P Mid-Cap 400 Growth
S&P Small-Cap 600 (VIOO),
Vanguard S&P Small-Cap 600 Value
(VIOV) and Vanguard
S&P Small-Cap Growth (VIOG).
charge between 0.15% and 0.20% of assets in annual fees.