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Seasonality plays

February's hot investing ticket? Industrial commodities Add to ...

Investing in the month of February frequently is hazardous to your financial health. Thackray’s 2012 Investor’s Guide notes that February is the second weakest month for performance by U.S. equity indices. The weakest month is September. On average, the S&P 500 Index has lost 0.2 per cent in February during the past 60 years.

The interesting exception in February is performance of industrial commodities. During the past 10 periods, the month of February has been their strongest month in the year.

The following is their average percentage change during the past 10 Februarys:

Silver 9.44

Platinum 7.34

Gold 2.67

Lumber 1.79

Copper 6.67

Crude Oil 6.69

Aluminum 2.85

The main reason for their strength is increasing seasonal demand during the spring as demand from key sectors such as construction and autos ramps up.

What about this year? Recent economic data suggest that history should repeat. Better-than-expected purchasing managers indices released before the opening on Wednesday by the euro zone and China as well as slow, but steady, economic growth in North America suggest that demand for industrial commodities once again will accelerate this spring.

A word of caution: Silver, platinum, gold, copper and aluminum gained more than 10 per cent in the month of January. Technically, they currently are overbought. Preferred strategy is to accumulate industrial commodities following a brief correction in early February.

A direct investment in most industrial commodities is available either through the futures market or through exchange traded products. Here are some of them: Silver , Platinum , Gold , Copper , Crude Oil , Aluminum and Nickel .

Don Vialoux is the author of free daily reports on equity markets, sectors, commodities and Exchange Traded Funds. He is also a research analyst for JovInvestment Management Inc. All of the views expressed herein are his personal views although they may be reflected in positions or transactions in the various client portfolios managed by JovInvestment. JovInvestment is the investment manager for the Horizons family of ETFs. Daily reports are available at http://www.timingthemarket.ca/

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