INK Canadian Insider Index slips, but should investors listen to copper?

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Mon, 03/09/2020 - 1:40 am Nicholas Winton, High on the Hog

Thank you for joining us in a weekly technical look at the mid-cap oriented INK Canadian Insider (CIN) Index. Last week, the heavily oversold INK Canadian Insider Index had an early bounce to 1137.69 before retreating alongside world markets on Friday. The Index came to rest at 1086.68 for a 9.24 point or a 0.8% decline.

MACD moved up 4.5 points to -10.8. RSI rose 9.7 points to 28.

Support is at 1070 and 1080. Resistance remains at 1100 and 1120.

As far as performance goes, the INK CIN trailed gold (6.75%), silver (+4.9%), the SPDR S&P 500 ETF (SPY*US) (+0.41%), and copper (0.81%). But the Index easily beat cringe-worthy crude oil (-7.77%).

After seeing RSI plunge to 18 last week (a trigger level for major price reversals and significant rallies in the past), we are now seeing momentum indicators rising. What makes this even more interesting is that chart-wise, we are noting what looks like a bullish falling wedge pattern (see chart) that could precede a major rally.

Stepping back for the big picture - it was a full week for investors. Anxiety over the spread of coronavirus remains high as do concerns about its lasting economic impact. The Fed cut interest rates half a percentage point and odds strongly favour further cuts. Despite that, markets and commodities seem to be slip-sliding on a way-one trip down a mountain.

And yet, I will note that each of the past two Fridays when US markets have fallen (-4.5% and -1.65%), the price of copper saw muted reaction (-0.08% and -0.49%). Furthermore, copper has not made new lows with the markets. This amazing relative strength we observe in copper should give investors pause, for it has long been a leading economic indicator and a canary in the coal mine for inflation.

Indeed, we just learned that at least one Fed official is suggesting the central bank may have to expand the type of assets it can buy. Given all of this information plus the fact investors are as bearish they have been in several years, it is my prediction that we are going to see markets and commodities (including oil) recover over the next few months and that we will see silver begin to outperform gold looking forward.

The INK Canadian Insider Index is used by the Horizons Cdn Insider Index ETF (HII).

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