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Over the past year (and even longer for some assets) there have been several segments of the economy that have been despised… and for good reason.

But they never drop from my radar. I never write off any segment of the economy.

And keeping an eye on what’s unpopular recently alerted me to two great trades for my Currency Cross Trader subscribers, who are already profiting from them. (One trade is up 160 pips!)

But how did I get tipped off in the first place? Well, I kept my eye on the stuff that everyone else hates.

Because when despised assets start to turn around, they can have legs for months come.

One of those despised segments is copper.

This metal has done nothing but drop for the past year. And no wonder – China was slowing and the global economy was limping, the U.S. suffered credit downgrades and Europe was mired in a sovereign debt crisis.

However, the secret is to watch what’s going down – because if you don’t you’ll miss the turning point.

Most traders won’t even be looking for a turning point in a commodity liker copper, because they will already have written it off.

But not me – and you shouldn’t either.

Check out the chart below and you’ll see what tipped me off to some great trades.

Copper’s Tug-of-War Breaks to the Upside

Please click here to view larger image

While I was watching this copper breakout, I was also still hearing economists on TV scratching their heads, and wondering which way things were going.  That’s because they were waiting for lagging economic data, such as GDP figures.

But not me or my subscribers. We look at the real-time price of copper, the most widely used industrial metal, to figure out the demand level and we know where the global economy is headed.

The Global Economy was Demanding More Copper

Last year, the story was “lack of demand” for copper. But once I saw copper breakout to the upside, I knew the global economy was demanding more of it.

So, I got bullish and got back into some “risk on” trades as a result.

But copper is only part of the story. There were two other segments of the economy that were despised just as much.

One of them was the homebuilding sector.

After all, who wanted to buy shares in homebuilders when banks weren’t lending, houses weren’t selling and prices were plunging?

Still, never write-off any area of the economy, just because it’s having a tough time.

Instead, watch and wait for the turnaround. I guarantee most people won’t be looking for it, which means they won’t get the “heads up” on the best trades either.

But check out the S&P Homebuilders Index below.

Homebuilding Stocks Have Been on Steroids Since October…

Please click here to view larger image

As you can see, homebuilders bottomed out in October, and they’ve been heading up ever since. And you can also see that around the turn of the year, the index finally broke its downtrend.

Most investors missed that completely.

There’s also a third segment of the economy that’s almost become a cuss word these days – financials!

No one has wanted to hold a bank stocks for years now. Nonetheless, it’s worth remembering – banks aren’t going away. The economy still needs to be financed.

As it happened, banks also bottomed out in October.

So, with copper, homebuilders and the banks all bottoming in the same month, the charts reveal that the global economy was likely about to get some relief… even if it was only temporary.

Each of those sectors also turned around in December.

I saw all of this unfolding, while the news was still filled with “gloom and doom.”

And that’s what gave me a great “lead time” over the crowd of fundamentalists waiting for their lagging economic data.

New Zealand and Canadian Dollars were Bound to Benefit

I jumped straight in on the long side of the market and bought NZD/USD and CAD/JPY – two commodity-currencies that would do well when the global economy improved.

And that’s exactly what happened.

My subscribers have started the year off right, and they’ve put some nice gains in their pocket as these trades have taken off.

Most traders were baffled when these trades went north. According to the news, they should still be heading south.

But we know better, and these are exactly the kinds of trends that we’ll be watching throughout the year.

If these segments of the economy turn south again… no problem! The key is to be watchful and not let the news paint the picture for you.

Instead, look at what’s driving the news, and never write off any of the despised sectors if you want to be the first to profit.

Have a Nice day!


Sean Hyman
Editor, Currency Cross Trader
January 2012

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