Dr Copper Back From The Dead – Time To Buy Or Blink

Anxiety is a thin stream of fear trickling through the mind. If encouraged, it cuts a channel into which all other thoughts are drained. -Arthur Somers Roche

Once upon a time, in the good old days, before QE changed everything, any signs of strength from copper could be construed as a sign that the economy was on the mend.  After QE, this story came to an end, and a new reality came into play. The Fed manipulated the markets in favour of short-term gains through what could be determined as borderline illegal monetary policy; a policy that has maintained an ultra-low interest rate environment that favours speculators and punishes savers.

In the past, the financial markets would have marched more or less to the same drumbeat as copper. The chart below illustrates that this no longer holds true. Instead of crashing with copper, the financial markets soared to new highs.

one wonders, what will unfold when copper does finally put in a bottom? Will the financial markets rally in unision once again with Doctor copper, or diverge as they have done for the past several years. Copper is issuing rather strong signs that a bottom could be close at hand. Our, trend indicator has not turned bullish yet, but it is dangerously close to issuing a bullish signal. There are, however, several technical indicators flashing positive divergence signals, and this could be construed as a bullish development.

The technical outlook

Failure to hold above 2.40 will most likely result in a test of the 2.20 ranges. The ideal setup would be for copper to trade to new lows, and trigger a buy signal in the process. Generally speaking, the elite players love to create the illusion that the market is ready to break out.  This ploy is known as a head fake; a move set to fool regular market technicians and the masses into thinking a bottom is in place. If you take the time to look at long term charts, you will see how splendidly this ruse has worked over the decades. The market in question does initially rally, but then it breaks down, the early bulls panic and dump everything. This usually triggers a fast move to new lows and then the smart money rushes in and starts to buy, which then ushers in a more sustainable bottom. Based on this premise, one could argue that this trick was employed in February of 2015. The markets rallied into May and then broke down again. If you look at the above chart, you will notice that this has occurred before, so one cannot put faith on this factor alone. Other factors have to come into play and it looks like those other factors could be coming into play now; we will mention them shortly.  Our goal has never been to predict the exact bottom in any market; an endeavour we feel that is best left to fools with an inordinate appetite for pain. We wait for the market to issue strong signals that a bottom is in or is close at hand. Sometimes this means getting in a bit early and sometimes it means getting in a bit later. The idea should be to catch the main move and not obsess on trying to get in at the exact bottom.  A monthly close above 2.50 would be a strong signal that that a bottom is in place and that Copper is attempting to mount a strong rally.          

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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