Best of the Week
Most Popular
1. Ray Dalio: This Debt Cycle Will End Soon - John_Mauldin
2.Stock Market Dow Plunge Following Fake US - China Trade War Truce - Nadeem_Walayat
3.UK House Prices 2019 No Deal BrExit 30% Crash Warning! - Nadeem_Walayat
4.What the Oil Short-sellers and OPEC Don’t Know about Peak Shale - Andrew_Butter
5.Stock Market Crashed While the Yield Curve Inverted - Troy_Bombardia
6.More Late-cycle Signs for the Stock Market and What’s Next - Troy_Bombardia
7.US Economy Will Deteriorate Over Next Half Year. What this Means for Stocks - Troy_Bombardia
8.TICK TOCK, Counting Down to the Next Recession - James_Quinn
9.How Theresa May Put Britain on the Path Towards BrExit Civil War - Nadeem_Walayat
10.This Is the End of Trump’s Economic Sugar High - Patrick_Watson
Last 7 days
Gold Price – US$700 Or US$7000? - 16th Jan 19
Commodities Are the Right Story for 2019 - 16th Jan 19
Bitcoin Price Wavers - 15th Jan 19
History Shows That “Disruptor Stocks” Will Make You the Most Money in a Bear Market - 15th Jan 19
What Will the Stock Market Do Around Earnings Season - 15th Jan 19
2018-2019 Pop Goes The Debt Bubble - 15th Jan 19
Are Global Stock Markets About To Rally 10 Percent? - 15th Jan 19
Here's something to make you money in 2019 - 15th Jan 19
Theresa May to Lose by Over 200 Votes as Remain MP's Plot Subverting Brexit - 15th Jan 19
Europe is Burning - 14th Jan 19
S&P 500 Bounces Off 2,600, Downward Reversal? - 14th Jan 19
Gold A Rally or a Bull Market? - 14th Jan 19
Gold Stocks, Dollar and Oil Cycle Moves to Profit from in 2019 - 14th Jan 19
How To Profit From The Death Of Las Vegas - 14th Jan 19
Real Reason for Land Rover Crisis is Poor Quality of Build - 14th Jan 19
Stock Market Looking Toppy! - 13th Jan 19
Liquidity, Money Supply, and Insolvency - 13th Jan 19
Top Ten Trends Lead to Gold Price - 13th Jan 19
Silver: A Long Term Perspective - 13th Jan 19
Trump's Impeachment? Watch the Stock Market - 12th Jan 19
Big Silver Move Foreshadowed as Industrial Panic Looms - 12th Jan 19
Gold GDXJ Upside Bests GDX - 12th Jan 19
Devastating Investment Losses Are Coming: What Is Your Advisor Doing About It? - 12th Jan 19
Things to do Before Choosing the Right Credit Card - 12th Jan 19
Japanese Yen Outlook In 2019 - 11th Jan 19
Yield curve suggests that US Recession is near: Trading Setups - 11th Jan 19
How Unrealistic Return Assumptions Are Ruining Your Stocks Portfolio - 10th Jan 19
What’s Next for the US Dollar, Gold, Stocks & Bonds? - 10th Jan 19
America's New Africa Strategy - 10th Jan 19
Gold Mine Production by Country - 10th Jan 19
Gold, Stocks and the Flattening Yield Curve - 10th Jan 19
Silver Price Trend Forecast Target for 2019 - 10th Jan 19
Silver Price Trend Forecast 2019 - 9th Jan 19
Did Strong December Payrolls Push Gold Prices Up? - 8th Jan 19
How to Spot A Tradable Stock Market Top? - 8th Jan 19
Why 90% of Traders Lose - 8th Jan 19
Breadth is Very Strong While Stocks are Surging. What’s Next for Stocks - 8th Jan 19
Half of Investment-Grade Bonds Are Just One Step from Junk Status - 7th Jan 19
Stocks Rallied Again, Still Just an Upward Correction? - 7th Jan 19
Gold Golden Long-Term Opportunity - 7th Jan 19

Market Oracle FREE Newsletter

Bitcoin Analysis and Trend Forecast 2019

The Curious Case of Copper...

Commodities / Copper Jan 30, 2016 - 04:33 AM GMT

By: Clive_Maund

Commodities

I recently watched a movie called The Curious Case of Benjamin Button which some of you may have seen. In this film the lead role, played by Brad Pitt, is born as a decrepit old man and gets steadily younger until he eventually died of old age as a baby. To say that it's ridiculous is the understatement of the millennium. Yet many people come away from watching this film thinking "How wonderful, if we all kept getting younger!" As a contrarian I instead found myself wondering about the catastrophic effect on the cosmetics industry, as the market for anti-aging creams would collapse.


I mention this because it was the inspiration for the title of this article, because at first glance it looks like the copper price is going to drop through the floor, yet on closer inspection there is evidence to suggest that it is instead going to stage a significant recovery rally, which supports our contention that there will now be some sort of recovery rally in the broad stockmarket.

When you look initially at the long-term chart for copper, it appears to be set to plummet to its 2008 crash lows at $1.25, and possibly even lower, but then when you look more closely at it, bearing in mind that its latest COTs look bullish, and sentiment towards it is in the basement, which is normally also bullish, it can be seen that is has arrived at the lower boundary of a potential major downtrend channel. It has actually gotten to this point in a relatively measured manner, without an all-out panic, which is why it is not more oversold on its MACD indicator.

Copper Long-Term Chart

As well as dropping to the bottom of the giant channel shown on its long-term chart, copper has also arrived at the bottom of the expanding channel shown on its 2-year chart, within a steeper sub-channel in force from last May. On this chart it is clear that it could rally all the way back up to the upper boundary of the expanding channel, which would take it to about $2.50 - $2.60, and still be within its bearmarket downtrend. On this chart we can also see that it has opened up a big gap with its 200-day moving average, as it had exactly a year ago, which lead to a sizeable rally. The same could happen now.

Copper 3-Year Chart

Other factors that increase the chances of an intermediate recovery rally include the latest COTs, which show that the Commercials have built up a big long position. They are normally right, while the Large Specs, who are habitually wrong, probably because they believe what they read in the papers, have built up a big short position.

Copper CoT

The Hedgers chart, which is another form of COT chart, is also interesting to see here, because it shows the 2nd most bullish position setup since at least 2003.

Copper Hedgers Position
Chart courtesy of www.sentimentrader.com

Sentiment towards copper is in the basement, as you would expect, with the 2nd most negative reading also since about 2003, as we can see on the copper optix, or optimism chart. This too suggests a rally.

Copper Optix
Chart courtesy of www.sentimentrader.com

Finally, the 6-month chart shows that copper staged a minor recovery rally late last week to arrive at a resistance level beneath which a couple of candles with longish "upper shadows" formed, suggesting that it may back off a little early next week. Apart from that though, the other factors that we have looked at point to an intermediate rally developing. On this chart we can also see that the recent new low was not confirmed by momentum, which is another positive sign.

Copper 6-Mnth Chart

"Alright, so what?", I here you ask - "There are few ways to play a move in copper profitably, so what use is this to me?" In the first place there is a big copper stock that is terribly beaten down and looks like it is set to recover, that we will have a look at on the site very soon. Because it is so terribly cheap, this stock could make a big percentage gain quickly, and fairly close stops can be set. Secondly, what we are seeing here has major implications for world markets at large, since if copper rallies it is most likely to do so against a background of recovering world markets, and that also means that oil is likely to recover as well, glut or not.

We will end with a quote by Benjamin himself:- "Our lives are defined by opportunities; even the ones we miss."

By Clive Maund
CliveMaund.com

For billing & subscription questions: subscriptions@clivemaund.com

© 2016 Clive Maund - The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

Clive Maund Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules