If Global Growth Has Topped, Why Are Copper Miners Bottoming?

With the recent release of weaker economic growth in China and renewed European debt contagion concerns because of Spain, I see a lot more chatter among the bears who argue that risk assets are on the verge of another major decline.  Many remain skeptical of the rally in stocks this year in the face of one of the best first quarters for risk assets in a long long time. Some attribute this to the "sugar high" resulting from the European Central Bank's various Long-Term Refinancing Operations.  Some attribute the move to short covering.  As followers of my various writings online are aware, I attribute it purely to the crowd's feeling that the deflation scare of last year has passed us.
 
Now that stocks in the U.S. have had their "worst week in 2012," many bears feel things will get worse. I am not in that camp. I have argued since January that this is likely a year of reflation similar to 2003 and 2009, which could result in a significant move higher for risk assets.  Following the Summer Crash, Fall Melt-Up, and Winter Resolution, I believe the Spring will bring with it a "Great Re-Allocation" out of risk-free and into risk. 
 
I noted earlier this month that the odds of a mini-correction have risen, and even sent out a tweet to followers of my thinking on Twitter (@pensionpartners) that our own models we run for client accounts have repositioned us largely into bonds. This is likely a near-term move, as this is in many ways the environment to see if the Spring Switch will occur. One of the reasons I think this is likely a shallow and short -lived correction is Copper.
 
Take a look below at the price ratio of the Global X Copper Miners ETF (COPX) relative to the S&P 500 (IVV).  As a reminder, a rising price ratio means the numerator/COPX is outperforming (up more/down less) the denominator/IVV.




I annotated the chart to show that despite global growth slowdown concerns and the risk-off trade expressing itself, Copper Miners appear to have hit a ratio bottom and could stage a period of outperformance from here. 

Given the role of Copper as a signal for economic growth, it is rather interesting to see that Copper Miners may be nearing a bottom just as the bears are starting to grow again. 
 
Disclosure: This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.