Guest Post by Tom McClellan
Chart Data Show a Bottom for Copper
October 10, 2014
Last week I pointed out how the Commitment of Traders (COT) Report data for currencies were pointing to a big topping condition for the dollar. That top appears to have arrived, and if the dollar heads downward then that should provide a boost to prices for all sorts of commodities.
Copper is a tough one. If copper hangs in and hints at an ‘inflation trade’ (i.e. anti-USD) bounce to come, I’d like to buy COPX or FCX. The charts are coming along nicely. COPX was NFTRH+’d recently for just such an occasion.
The weekly chart of copper is trying to hold above a downtrend breakout line and hold a trend out of March.
But the monthly chart is still disgusting, a year or so after it was created…
With Copper rising above the converged 50 and 200 day SMA’s (around 3.18/lb) and with commodities in general at do-or-die support, I wanted to put up a chart of COPX for future reference for you copper/base metals aficionados.
Guest Post by Ino.com
The Dow Future is higher 19 points to 16506. The US Dollar Index moved higher by 0.069 points to 80.288. Gold has slipped 5.57 dollars to 1286.80. Silver is trending lower 0.0990 dollars to 19.8575. The Dow Industrials rose 40.39 points, at 16573.00, while the S&P 500 trended higher 5.38 points, last seen at 1890.90. The Nasdaq Composite moved up 8.60 points to 4276.64.
|GOLD Jun 2014
|SPDR GOLD SHARES
|SILVER May 2014
|PALLADIUM Jun 2014
|DIREXION DAILY GOLD MINERS BEA
|POWERSHARES DB PRECIOUS METALS
Now we will get to test the theory that little of what most people consider fundamentals for gold actually matters. That would be things like Indian wedding season, jewelry demand, central bank buying/selling and the one hyped in the gold “community” more than any other, China gold demand.
From Hard Assets Investor: Gold Flat Amid China Demand Drop
According to the China Gold Association, demand in the world’s largest No. 1 consumer may fall 17 percent this quarter from a year ago. An official for the trade group said the decline wasn’t unusual given the huge spike in demand last year.
“Last year was a peculiar year when we saw a big fall in prices,” Zhang Yongtao, vice chairman of the CGA, said. “People bought a lot of gold, and I think demand will start climbing again once the festive and marriage season begin later this year.”
‘But but… China gold demand is strong!!’ kept people bullish last year as gold got blown up. Marriage season? Please. For me it is investment demand that matters.
It’s in alignment with a positive view for the whole damn commodity complex and a new wrinkle in the analysis to be fleshed out and kept tabs upon going forward.
A house call from a specialist in exhaustion might be in order for Doctor Copper if the weekly copper chart is any indication.
Above the dotted neckline something else would be going on, like a meaningful commodity (inflation) rally. Below it, and especially the solid downtrend line? Not so much.
Cu weekly, from NFTRH 271
So when is it going to matter that all this economic strength is not translating to anything other than the financialized aspects of the economy? I mean yes, manufacturing is strong. NFTRH was THE first to anticipate that (that I could see anyway, as most current bulls were thumb sucking a year ago). But where’s the beef? Where’s the heavy red metal?
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.