Is Dr. Copper Diagnosing A Continuation Of The Commodity Bear Market?
Today’s Spotlight Market
Weak demand for Copper by end-users has triggered a move of the ?red-metal? to exchange warehouses. London Metal Exchange (LME) warehouse stocks are hovering near 52-week highs at just under 339,000 metric tons, which is more than double the level of exchange inventories year over year. Speculators have also taken a dim view on Copper prices, holding a combined net-short position on the COMEX of 26,724 contracts according to the most recent Commitment of Traders report. ?
Fundamentals
It has been said that the Copper market has a PhD, or at least a master?s degree in economics due to its ?ability? to signal potential turning points in the global economy. While the good ?Doc? is not infallible in its predictive powers, the market?s trend the last 5 years does make one wonder about the current strength of the global economy. Copper prices are hovering near 6-year lows, with analysts attributing the weakness in prices to lower global demand for commodities, especially from China, which is experiencing a slowdown in its economic growth from the double-digit gains seen in years past as well as a rebound in the value of the U.S. Dollar (USD), which makes commodities priced in USDs more expensive for non-Dollar users. In addition, it appears that the major Copper producers are not yet willing to curb production due to lower production costs tied to lower energy prices and weakness in local currencies where the mining occurs. It may take Copper prices moving below about $2.30 per pound before marginal mining costs become an issue and potentially force the major mining companies to curtail production.
Technical Notes? -? View Today’s Chart
Looking at the weekly continuation chart for Comex Copper futures, we notice the market has been in a bearish channel for nearly 4 years, as prices have fallen nearly 50% from their peak back in early 2011. Prices are now trading near the lower bounds of the channel, which has in the past halted price declines. The 14-week RSI is nearing oversold levels, with a current reading of 30.54. The next major chart support level is seen near 2.1100, with resistance found at 2.9600.
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