Copper

There is as yet insufficient evidence to speculate on whether copper's impressive post-election leap will turn into a belly flop, or instead prove to be the booster stage of a much bigger rally. Whichever is the case -- and I strongly doubt there will be any in-betweens -- it's inconceivable that this legendarily sensitive economic barometer will guess the outcome incorrectly. Inflation, or deflation? Growth or economic stagnation?  Keep your eyes focused on 'doc' copper and you cannot miss an important turn -- assuming one comes, and however unexpected -- toward inflation following 35 years of the opposite. From a technical standpoint, it is necessary to see that, so far at least, copper's steepest rally in a decade is still just a fledgling on the weekly chart. Yes, it has surmounted a daunting multitude of minor peaks. However, these are mere foothills in comparison to the two 'external' peaks that I've labeled. The higher lies at 3.2790, and any rally from these levels that surpasses it without taking much of a breather along the way will be convincing evidence that the rip-roaring inflation of the 1970s is about to return in some shape or form. Anything less than that, however, can only suggest that an economic upswing of indeterminate strength is coming and perhaps no more.

'Doc Copper' is widely viewed as being able to predict upswings and slumps in the economy of manufacturing and real goods, so we should want to get this one in particular right. The post-election rally in Copper futures is on track for putting up one of the strongest months in the past decade. Buyers have retrenched somewhat in the last few days, but are they spent? This is unlikely in my estimation, since the rally has already generated a robust 'impulse leg' on the monthly chart, surpassing the two labeled peaks (see inset) we require. Under the rules of the Hidden Pivot Method, this specifically implies that any pullback short of the 2016 low, 1.9355, is merely corrective and should be viewed as a consolidation for a second, powerful leg up. It would be more bullish still if, before November ends, the already impressive price bar for November extends above 2015's high, 2.9610 (labeled #3 in the chart). It would require less than that, however, to trip a long-term buy signal. A print at the green line (2.7841) would do the trick, while also calling for a more bullish bias on trades in various time frames ranging from intraday to daily, weekly and monthly. A $5.33 target would be theoretically in play at that point, raising at least the possibility that the commodity sector as a whole is in for some very significant inflation.  This goes directly against forecasts that I've stood by for years, including a fall in long-term interest rates to under 1%. As such, I will continue to monitor copper's charts very closely, since, at the end of the day, I will need to trust what they are saying more than I do my gut instincts. This doesn't mean I'm about to recant my deflationist views any

It's been a while since we last looked in on 'Doc Copper', which has continued to grind through a bear market begun early in 2011. The price has dropped 46% over that time, but the move is still corrective relative to the bull-market low of $1.25/pound recorded at the end of 2008. What would it take to turn prices higher?  The question is important, since even the mere prospect of a full recovery from the Great Recession is certain to be telegraphed by rising copper prices. Technically speaking, the high-grade contract would come alive on a rally touching 3.2381. If the move were to go slightly higher, exceeding the 3.2790 peak made a little less than a year ago, that would not only clinch still-higher prices, it would also hint of a strong upswing in the world economy, particularly in an otherwise moribund manufacturing sector. Thereafter, depending on how quickly the futures achieve the next threshold, a 'midpoint Hidden Pivot' at 4.0573, we might infer an upswing strong enough, even, to float Europe's distressed boat. The foregoing is of course speculative, since it's entirely possible copper prices will relapse, giving up the rest of the 54-cent gain it achieved between January and May of this year. Were that to occur, we could probably tune out the blather about the America's nascent growth spurt, as well as the supposed likelihood of explicit tightening by the Fed.

Copper's chart looks almost as ugly as crude's -- no surprise, since both reflect the state of the global economy far better than nutty GDP figures that seem to capture mainly the health of the U.S. car-leasing business.  Notice that March Copper has bounced from a recent low somewhat above a clear Hidden Pivot target at 2.3635. My hunch is that the eventual low will occur even closer to the target, but that the futures are due for a bounce in any event. (This number corresponds to a projected low of 43.58 in March Crude.) If the support fails, however, you should infer that Copper will fall to 2.1665 before it turns around. That, too, is a Hidden Pivot target, and it can be bottom-fished aggressively with as tight a stop-loss as you can abide. _______ UPDATE (Feb 2, 10:17 p.m.): Copper has gotten tugged higher by the rally in crude oil, with the result that this vehicle now looks bound for at least 2.5555. Anything above that Hidden Pivot would be telegraphing more strength. _______ UPDATE (Feb 3, 11:03 p.m.): This short squeeze will reach a new threshold of viciousness if it exceeds the 'look-to-the-left' external peak recorded on January 13 at 2.6590. Based on Hidden Pivot Analysis, I'm looking for at least 2.6435 over the very near term. _______ UPDATE (Feb 5, 11:20 p.m.): Doc Copper now looks poised for a run-up over the near term to 2.6675, a Hidden Pivot resistance of middling importance. _______ UPDATE (Feb 10, 8:18 p.m.): Oh well, Doc Copper has aborted the move. I'm going to archive this tout lest we become bored with it. FWIW, at Wednesday's close, the downtrend pointed to a minor Hidden Pivot support at 2.5208, or 2.5010 if any lower. _______ UPDATE (Feb 12, 11:50 a.m. EST):

Copper's continuous daily chart shows how precarious things look at the moment.  Although the dip six months ago beneath the midpoint support at 3.0273 was a bearish sign, buyers had managed to hold the futures moderately buoyant since. Their support looks to be waning, however, and if and when it fails, look for this vehicle to fall all the way to 2.6300 before it finds traction. _______ UPDATE (October 14, 10:36 a.m. EDT): I'm unpersuaded that this rally will amount to much.  The long-term downdtrend projecting to 2.6300 is still very much intact, and this will remain so unless C= 3.4245 is exceeded to the upside. That said, the daily chart has today swung bullishly (and potentially tradably) impulsive, with A=2.8985 on October 10.

Copper's rally since mid-June may look impressive on the hourly chart, but take a look at this 'weekly' before you draw the wrong conclusions. To be sure, the bull market begun in the final days of 2008 is very much intact. But a corrective phase now well into its fourth year shows no sign of relenting. If and when that happens, the metal could be headed as high as $6 a pound, but for now it looks like sub-$3.50 prices are here to stay. Would would change my outlook? Very simply, a thrust exceeding the subtle 3.4525 'external' peak recorded on the way down in April 2013.  Copper is nonetheless a bull trade at the moment and would become a screaming spec 'buy' on a pullback from above the minor, 3.3200 peak shown.

When we last looked in on 'Doc Copper', it was to ascertain a 2.7780 target for the composite weekly contract, with a worst-case possibility of 2.4435 if the higher number doesn't hold. The chart shown shows a third possibility -- one at 2.6375 that we should treat as a back-up-the-truck number for purposes of bottom-fishing. Although the futures have been in rally mode for the last two weeks, I seriously doubt they will escape the pull of gravity represented by this constellation of Hidden Pivot supports .  Accordingly, in anticipation of possible opportunities to come, you should set screen alerts that reference the levels I've noted above. _______ UPDATE (April 15): Basis the June contract, I am now projecting more slippage to at least 2.6115.  On the way down, look for tradable bounces near 2.8698; or if any lower, at exactly 2.6685.

In January, when we last looked in on 'Doc Copper' for clues about the health of the global economy, it was in the throes of a two-month rally that I said would go nowhere.  Subsequent developments have borne me out and then some, since the price per pound has declined by nearly 50 cents since then. Clearly, this does not bode well for economic growth, nor for the manufacturing economy of the world's commodity engine, China. My current outlook calls for more slippage to at least $2.78 a pound, basis the continuous contract.  And if that 'hidden' support fails decisively, meaning by more than 2 or 3 cents, there is room for a further drop to $2.44. At that point, the world's economy would probably be in synchronous recession, even if the Dow is trading significantly higher.

'Doc' Copper looks bound for a long slog through purgatory, based on the recent failure of the March contract to push above the 3.4295 'external' peak labeled in the chart. This is chicken-hearted action, and it suggests that the uptrend begun last summer from just above $3 is not destined for anything special, let alone greatness. To the extent that copper is a reliable predictor of economic activity, we might infer that the global economy will remain subdued for the foreseeable future.