After unbelievable moves higher, many metal stocks are now seeing unique price action over the last couple weeks, going against the flow of the markets.  The markets have inched higher, making a new 52 week high in the last week, but key stocks that are a solid gauge of a healthy economic rebound have stalled and some have fallen sharply.  This may be as sign of trouble brewing as they can often be an economic leading indicator.

Take a look at these charts below.  Southern Copper Corporation (NYSE:SCCO) topped out in January at a 52 week high of $36.29.  While most other stocks have since taken out that January high in the recent stock market run up, Southern Copper has not. The stock hit a low of $30.84 today, well off that January high.  This is a tremendous fall since January.  Southern Copper is known as a leader, and strong price action would dictate global economic growth.

Next, let’s look at AK Steel Holding Corporation (NYSE:AKS).  The stock also topped out at a 52 week high at $26.75 in January and has since never even looked back.  In fact, in the last two weeks, the stock has collapsed lower, hitting $18.51 today.  This again does not show us a robust growth situation in the global economy which is what the markets supposedly have rallied on, over the last few months.

Stocks like United States Steel Corporation (NYSE:X), Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) and many other metal plays show the same chart.

In understanding how the metal stocks play a key role in showing economic growth, it leaves me to wonder if we truly do have as robust of a recovery on our hands or if it can last once the stimulus is taken away.  In addition, it makes me wonder if these stocks rolling over could be a leading indicator for the markets to lose ground shortly.  Join the Research Center to gain access to the secret techniques, guidance, plays and education that the hedge funds utilize to make billions.

Gareth Soloway
Chief Market Strategist