With Alcoa being a leading producer of Aluminium it shouldn’t come as too much of a surprise that the company has a well formed relationship with Aluminium prices.
– Last two primary tops of Alcoa provided a 1-3 month lead for Aluminium top
– Aluminium bottomed 1 month before Alcoa to provide a buy signal
– Both markets are within a downtrend so look out for either to provide the lead for a buy signal in 2012
– Relative strength should provide a clue here if it breaks its current downtrend line
– They currently correlate very closely (0.8 out of 1) so expect the correlation to drop once either Alcoa or Aluminium take the lead (historically Aluminium has bottom first)