TRQ, TSX, Copper and so on

The other day there was this fellow on BNN that suggested that the TSX has broken lose from its correlation with copper. He is pretty good (Price?) despite sometimes looking like a hippie. Here is the argument:

tsx feb 15 2014Copper feb 15 2014

The InfoMine Copper chart is expressed in US dollar terms and the TSX in Canadian; both charts cover roughly the same time period. The correlation is not perfect but does get a little better if you make adjustments for the exchange rate (a low in 2001). Certainly for the past few years the correlation is pretty good, but notice that in the last year the two have parted company with the TSX going up and copper going down. Perhaps is more a petro country than a copper country. In any event I have drawn a line through the TSX chart which is my best effort at finding the middle of the range for the past 25 years. If that line holds (on average) the TSX should be at about 15000 in 3 years time (starting where it is now, not where it is on the average line). That works out to about 10% for the whole period or roughly 3 % per annum. The question is “Why would you do that??”. Why not buy TRQ instead?;

TRQ feb 2014 bTRQ feb 15 s 2014

We thought (see previous blogs) that this stock was a screaming buy. It did go up about 30% but has settled down back to $3.25. A drop to $2  ( a wave 4 of prev. degr.) or so cannot be completely excluded but we prefer to think that the stock is already on the way up. The initial target regardless of the path it takes, is around $5.50 (the wave 4 of 5 of C triangle). The copper price is barely relevant and it has a lot of gold as well. In short , if you like the TSX because it correlates well with copper you have to like TRQ more. If you like the TSX because it has detached itself from copper, you should also like TRQ more as it is down 90% rather than about 10% for the TSX.  Buy low sell high, not buy high and sell low.