Doctor Copper needs to make a house call to the emerging markets and he needs to prescribe ‘bullish’. MSEMF (lower panel) looks like it is in some kind of a massive topping pattern (it does not look like a bullish consolidation to me) and the problem is that the good Doctor is making the same pattern.
The potential is for a 2008 style deflationary Armageddon in commodities and emerging markets. Now, would the US (and maybe Europe), with their respective funny munny financial chicanery get off scott free, perhaps even getting the big bid as the world rushes out of commodities and EM’s? Well as obnoxious as it sounds, it could happen. Though I wouldn’t bet on it.
Imagine the world rushing to T bonds, amplifying the Fed’s current operation. Imagine US mortgage rates tanking. Imagine the shining new era of Fortress America and its financial apparatus. What was the last ‘new era’, the Dot.coms and the ‘new economy’? Could we have a new one that rejects the old fashioned notion that the US stock market has a copper roof? Sort of the modern edition of the circa 1999 rejection of a ‘brick and mortar’ business model?
Just riffing here. I think commodities and EM’s are a bearish divergence to the US and Europe. But unfortunately, with the Fed in the markets 24/7 now these type of questions need to at least be considered.
Look who got back up into the channel yesterday with the strong ISM. We noted manufacturing strength back in January as a contact informed me of how robust the semiconductor fab equipment ramp up was. The most recent input is “busy and due to get busier”.
Take if for what it is worth, but what it has been worth for all of 2013 is an economic growth spurt. Copper has been conspicuous in its bearishness, but if growth fans out a bit – even temporarily – globally, the bearishness could be reversed. The weekly charts will tell.
Daily copper made this move but still has a significant obstacle by bigger picture charts. There are other signs that say inflation may gain a little notoriety in the weeks ahead. If so, Doctor Copper and several of his positively correlated friends could participate. Bring on ‘Jobs’ and let’s see where we are at.
Despite the decent US economy, copper has broken down from a channel that was itself trying to prove that the positively correlated red metal was not in a big picture breakdown. On the big picture, copper is in a topping pattern, having lost a neckline similar to when HUI lost 375. Today copper has recovered a bit but at 3.08/lb. is still below the channel breakdown.
The stock market seems not to need its copper roof in this cycle and that’s a good thing because the roof is cracked, leaking and about to fall apart.
248 starts out talking about why this precious metals decline is different from 2008 and why I am not able to label it a ‘no brainer’ buy yet, as in Q4 ’08. Nervous Nellie? Yes, I guess. Contrary indicator? Maybe.
But discipline is my main tool and certain indicators tell me to have discipline despite a rising bullish potential on the precious metals. It’s just the way it is. There are a few early signals that look good, but there other negative signals that may not yet have completed their negativity.
248 also covers commodities, bonds, currencies, global markets as well as a once again negative contrary sentiment backdrop developing for the US market. Sleep nice and comfy little bulls… there is not a worry in the world.
NFTRH 248, all 30 pages of it, out now.
The Cu-Au ratio is actually on a breakout signal that would favor stock bulls, economy bulls and happy thinkers everywhere.
Cu-Au ratio, click for full size view
Well, maybe that is an exaggeration because all trend lines break sooner or later. But Cu-Au has broken the severe downtrend out of 2006. If the green dotted line breaks down, we are going to deflationary hell. If it holds, there may yet be an inflationary recovery play in the making.
To review, the top in 2006 came as copper blew out as one of the featured players in Alan Greenspan’s credit stoked inflationary bull market. The top in 2011 came as Bill Gross announced that inflation was going to break out and he shorted the long bond (oops). And now, here we are.
It’s not exactly an inspiring picture for the positive people clicking the heels of their ruby slippers, but Cu-Au did break a downtrend line, and is above an uptrend one. It will be interesting to see if it holds the green dotted line.
Here’s the COPX fund, breaking a line that it should really try to stay above.
COPX daily chart
The setup for the gold sector will be when all this other stuff tanks and when the commodity and inflation bulls are rinsed away with the broad stock market. We are on a secular counter-cycle and that is no place for copper or the other positively correlated stuff.
Sometimes I write things like that and it sounds silly, even bringing ridicule from certain areas (and speaking of ridicule, I’ll mention Prechter until I am blue in the face if needed to make my points).
Casino patrons tend to live in the immediate here and now, always emotionally or egotistically looking for validation to their views. The market moves at its own pace and copper (along with the rest of the industrial metals complex) shows that on the big picture things may not be so rosy.
Cu weekly chart is violating a parameter