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Thursday, February 28, 2013


I am sure most people have heard the old saying that copper has a PHD in economics.  I talked about its recent move lower, but lets look a little more in depth.  I think this is a pretty interesting chart.


The price of copper is forming a triangle pattern and is approaching a test of the lower trend line again.  It already has three points of contact on each line.  It is time to make a decision.  The bottom pane of COT data shows traders were net short at each of the three prior tests of the lows.  The last swing up to the upper trend line had traders the most long since back in 2011.  Despite all the longs, copper did not break out.  As copper is now approaching the lower trend line, traders remain fairly long.  With three touches already and traders still long I think this will break down this time.  I think this is a direct indication the global economy is still not picking up steam.  Here is the copper stocks ETF COPX.

COPX is confirming the weakness in copper itself.  That was quite the move down last week.  While the pundits on TV keep telling me the global economy is improving it would seem somebody forgot to tell copper.  If it breaks down out of that triangle pattern I think it will be noticed.  At this point that looks pretty likely to me.


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