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The Copper Price and the Stock Market Trend

Stock-Markets / Stock Markets 2011 Mar 29, 2011 - 05:04 PM GMT

By: Nadeem_Walayat

Stock-Markets

Best Financial Markets Analysis ArticleCopper is an important industrial metal which can be treated as a leading economic indicator for economic activity that extends beyond the performance of the mining sector stocks and can be expected to act as an oscillating leading / lagging indicator for the overall stock market trend, the degree to which this analysis seeks to determine.


The below graph illustrates the trend relationship between the copper price and the Dow Jones Stocks Index where there has been a clear tendency during the past few years for the copper price to lead the stock market price trend.

The most recent price action of a weakening copper trend is line with that of a weak stock market price trend. Whilst the stock market has bounced strongly from the recent lows, however the copper price continues to show relative weakness which suggests that the stock market trend over the coming months is going to find it difficult to break higher until the copper price trend again starts to out perform the stock market trend.

A closer look at the copper price shows a market that is consolidating a strong bull run from the last significant low of 272 in June 2010, with the last low of 407.60 being a near perfect technical bounce off of support from the preceding high, therefore strong support lies under the market at around this level. In terms of the bull market trend, the break of the support trendline implies that the correction is not over in terms of time which at the very least suggests that copper is likely to test the 407 support and more probably break support before turning higher again. This suggests that copper has some months to go before the bull market resumes and since the stock market can be expected to lag copper then a resumption of a sustained stock market bull run is even further out, thus suggests that the stock market is likely to trend within a trading range for much of the summer months i.e. at least into July 2011.

Stock Market Trend Forecast for 2011.

This analysis forms part of a series that is working towards a detailed forecast trend conclusion for the stocks stealth bull market for the remainder of 2011. Ensure you are subscribed to my always free newsletter to get this in your email in box on completion (including a comprehensive ebook).

Recap of Stock Market Trend Forecast for 2010 - 02 Feb 2010 - Stocks Stealth Bull Market Trend Forecast For 2010

Dow 10,067 - Stocks Multi-year Bull Market that bottomed in March 2009 will trend Sideways during first half of 2010 attempting to break higher. The second half will see a strong rally to above 12,000 targeting 12,500 during late 2010.

DOW Stock Market Forecast 2010

Source and Comments: http://www.marketoracle.co.uk/Article27240.html

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2011 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of two ebook's - The Inflation Mega-Trend(Jan 2010) and The Interest Rate Mega-Trend(Mar 2011) that can be downloaded for Free. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

JimK
31 Mar 11, 08:25
Buying Copper Low ???

Shouldn't we be accumulating copper, now, as it goes down?


AC
31 Mar 11, 14:10
Copper and Chinese Leverage

Wouldnt a little more fall in copper price lead to large scale liquidation by speculators in China who are using copper (and letter of credits) as collateral to build ever bigger exposure and as a result hoarding copper?


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