Markets are always talking. The trick is in discerning what to listen to versus what to ignore.
There’s a lot of noise out there these days. You can get lost in it.
But when it comes to commodities, the Canadian Dollar is all signal and zero noise- and right now, it’s screaming at us.
I’m all ears. Here’s why.
The CAD isn’t just a currency pair. It’s a global commodity barometer.
Canada is one of the world’s most resource-rich economies—think copper, nickel, gold, uranium, potash, oil, and more.
The loonie doesn’t just trade on local rates or policy expectations. It trades on global demand for raw materials.
So when CAD moves, the entire commodity complex pays attention. And so do I.
Here it is overlaid with the Copper/Gold ratio:
As technicians, we know nothing happens in a vacuum. Markets are interconnected, even across asset classes.
The relationship between copper and gold has been used to measure broad risk appetite for as long as humans have studied modern markets. Consider it the OG of risk indicators.
Gold is a non-yielding, defensive asset and an inflationary hedge.
Copper, on the other hand, is a risk-on metal— packed with information about industrial activity and global economic growth.
Right now, the Copper/Gold ratio is bottoming, and CAD is confirming the action. It’s been leading the way higher for months now.
And notice how bottoms in this ratio and CAD aren’t just bullish for copper and copper miners—they tend to signal broader risk-on regimes.
When Copper is beating Gold and the loonie is beating the greenback, stocks tend to be in a bull market as well.
And this kind of action isn’t end-of-cycle stuff… notice how the bottoms in CAD and Copper coincide with major bottoms in the equities market.
The relationship is even stronger if we substitute materials stocks for the S&P 500.
Here’s the same chart as above, but with the Large Cap Basic Materials Sector SPDR $XLB:
Right now, I’d say Copper and CAD are ringing the dinner bell. We’ve seen it before, and I doubt this time will be any different.
This kind of intermarket analysis is best served with a big-picture view.
For example, this chart doesn’t make me want to go load the boat with copper futures and get short gold.
I’m also not running out and buying CAD futures based on this.
It’s just valuable context about where the best opportunities of the future might lie.
And the recent action begs a big question…
If this is a durable bottom in CAD and Copper/Gold, what are the right vehicles to take advantage of it?
For me, the answer is commodities stocks. And not just any, but the riskiest ones.
Risk appetite is booming. It’s not just growth stocks and cryptos that we want to go out on the risk curve with.
We’re getting the same information about commodities markets.
When capital flows into an asset class or segment of the market, it rarely stays put in one spot. Rotation, after all, is the lifeblood of a bull market.
And right now is as good a time as any to rotate into some of the most aggressive metals, mining, and mineral stocks available to us.
And while many of these names have already seen significant returns, we believe the move is just getting started. As participation expands, so will the number of charts we want to buy.
In fact, there are already plenty.
Here’s a fresh batch of our best ideas to play the bottom in CAD… and the impending rally in commodities stocks.
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