At a “Sweet Spot” to take action

Posted by Don Valiloux - Timing the Market

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According to Thackray’s 2010 Investor’s guide, the S&P Metals and Mining Sector has a period of seasonal strength from November 19th to May 6th. The trade has been profitable in 14 of the past 20 periods. Average return per period was 13.8%. Average return per period exceeded the S&P 500 Index returns by 7.9%

The sector has a seasonal sweet spot between January 29th and May 6th. The trade has been profitable in 13 of the past 20 periods for an average return per period of 6.3%.


Chart courtesy of Brooke Thackray

Strength during the period of seasonal strength can be attributed to rising demand and prices for basic commodities including copper, zinc, nickel, steel, iron ore, silver and platinum.

Technical influences


Chart courtesy of

The TSX Global Mining ETF has a mixed technical profile. Intermediate trend recently changed from up to neutral when the Index fell through support at 98.39. The Index has dropped 12.3% since its high two weeks ago. Short term momentum indicators are trending lower and already are oversold. However, they have yet to show technical signs of bottoming. Strength relative to the TSX Composite Index is negative and has not shown technical signs of recovering.

Fundamental influences

Earnings growth prospects in 2010 are exceptional. Demand for materials is expected to accelerate as spending from economic stimulus programs announced by the world’s largest nations last year start to focus on infrastructure programs. Planning and engineering have been completed. The shovels for many of these programs go into the ground this spring. Prices of basic materials including copper, zinc, lumber, steel, iron ore, silver and platinum are expected to continue their uptrend from depressed 2009 levels.


The Bottom Line

The seasonal trade in the sector is lining up nicely this year. A refined technical entry point has yet to appear, but likely will arrive shortly. ETFs in the sector include the Claymore S&P/TSX Global Mining Index (CMW), BMO S&P/TSX Equal Weight Global Base Metals Hedged to CAD Index (ZMT), the Horizons double leveraged HBP S&P/TSX Global Base Metal Bull Plus ETF (HMU) and the S&P Metals & Mining SPDR (XME).

… more HERE on the opportunities in the Oil Equipment and Services sector and the Materials Sector.


You can check out Don Vialoux’s Long Term Forecast at January 22,23rds



Don Vialoux has 37 years of experience in the Investment Industry. He is a past president of the Canadian Society of Technical Analysts ( and a former technical analyst at RBC Investments. Don earned his Chartered Market Technician (CMT) designation from the Market Technician Association in 1995. His CMT paper entitled “Seasonality in Canadian Equity Markets” was published in the Spring-Summer 1996 edition of the MTA Journal. Don also has extensive experience with Exchange Traded Funds (also know as Index Participation Units) as well as conservative option strategies. In 1990 he wrote a report that was released in the International Federation of Technical Analyst Journal entitled “Profiting from a Combination of Technical and Fundamental Analysis”. The report introduced ” The Eight Phases of the Stock Market Cycle”, an investment concept that continues to identify profitable entry and exit points for North American equity markets.   He is currently a member of the Toronto Society of Fundamental Analyst’s Derivatives Committee.   Now he is the author of a daily letter on equity markets available free on the internet. The reports can be accessed daily right here at