Copper

Copper  futures, which have a canny way of anticipating the economy's ups and downs, are closing on a crucial resistance (see inset).  The red line, a Hidden Pivot midpoint that should be regarded as a short-sale opportunity, comes in at 3.3838.  However, shorting there would be somewhat riskier than usual, since a print at that level would exceed some prior peaks on the weekly chart, signaling a possible breakout. My hunch is that the red line will be surpassed this week but that the follow-through will be relatively feeble. Whatever the case, price action over the next week or so could have significant implications not only for the economy but for bullion, since no surge in copper prices is likely to occur without a corresponding move in gold and silver. _______ UPDATE (December 17 at 9:54 p.m. EST): Interpolating for the continuous March contract, the red-line pivot comes in at 3.3829, 0.0044 above yesterday's high. _______ UPDATE (January 6): The futures have fallen sharply after double-topping near 3.42. A short was signaled from 3.4160, but it's likely that few bears would have been feeling up to the trade by then.

Copper has been struggling since May to reverse the damage caused by the breach of a long-term midpoint support, to little avail. Now it looks like a fall to the 2.7780 target associated with that Hidden Pivot is all but certain. That's a decline of 12% from these levels, but it wouldn't necessarily mark the end of the bear market begun nearly three years ago.  More likely is a strong (and tradable) bounce from 2.7780, then a resumption of the downtrend to 2.4435, a target derived from sliding point A to a higher peak (A2). ________ UPDATE (November 26 4:10 a.m. EDT): The futures deserve the cautious  benefit of the doubt at the moment, since they've turned from well above the target given above. However, the rally would gain more credibility if bulls are able to pop this vehicle above the two peaks shown -- and the sooner the better.

In the current forum discussion, Cam Fitzgerald focuses on coffee's bear market to provide some lucid insights into the deflationary dynamic at work in the commodity markets. He notes that although the price of coffee beans has collapsed, falling by two-thirds since 2011, Starbucks is still charging the same four bucks for a large latte. This profit-friendly anomaly has held true for many other companies that benefit from a widening spread between commodity prices and end products. It would seem to flout the laws of supply and demand, but Cam says the textbook relationship will reassert itself with a vengeance as consumers become increasingly frugal under the weight of a deepening Great Recession. From a technical standpoint, his theory looks quite solid. The weekly chart (see inset) implies that a pound of coffee currently trading on NYMEX for $1.03 is about to fall by half. If the futures were in fact to achieve the Hidden Pivot target of 53 cents, that would represent an 83% drop from 2011's all-time high of $3.08.  Coffee lovers may have something to look forward to, but they should be careful what they wish for, since the implication of coffee beans selling for 50 cents a pound is that the world by then will be chest-deep in a deflation of falling wages, plummeting asset values and significantly lower corporate profits.

On speculation that a broadening Chinese slowdown could devastate commodity prices, I've reproduced September Copper's weekly chart.  Price action precisely at and around the p midpoint (red line) implies not only that we are using the right pattern to produce an accurate and reliable target at 2.7780, but that the futures have crossed the point of no return on their way down to it. If the global recession is about to deepen, we should see 2.7780 give way within days of first being touched.  However, a strong bounce from very near that number would imply that the world's economy is not necessarily about to deep-six.

Copper's chances of reversing a bear market now well into its third year took a hit recently when the futures slightly exceeded a key low recorded in October 2011. This refreshed the bearish impulsiveness of the daily chart (note: this is a composite chart with 'blended' highs and lows) while reaffirming the 2.7780 bear market target shown. Bulls would earn a fighting chance by pushing this vehicle above the 3. 3490 peak I've labeled, but it looks unlikely right now.  Somewhat less encouraging but still viable would be a print at 3.2435, which would top a lesser peak not clearly visible (but labeled).

If the futures close beneath this week's 2.9855 so-far low, expect further slippage to at least 2.9765, the next Hidden Pivot support in the sequence shown. Camouflageurs keen on bottom-fishing should look for an entry spot on charts of minute degree or less. Notice that the highest possible 'A' here -- a one-off, in this case -- implies a bear market low at 2.6955, a 9.4% fall from these levels. ______ UPDATE (July 1, 2:00 a.m. EDT):  The support noted above has held so far, but if the rally is the real McCoy it should be able to at least equal the 3.235 D target of (60-min) A=2.9855 (6/25); B=3.0935 (6/25); C=3.0155 (6/27).  _______UPDATE (July 8, 2:28 a.m. EDT): The rally appears to have failed from a high at 3.1790 that fell well shy of my benchmark.

Copper's nasty slide has been getting a lot of ink lately, since it is viewed as a harbinger of a weakening economy.  From  a technical standpoint, the futures decisive breach of a midpoint support that had held for 17 months augurs more downside over the near term to at least 2.7780, equivalent to an 11% fall.  If this Hidden Pivot 'D' target were to give way, however, we'd probably be looking at a second wave of selling down to 2.4435.  Camo traders should position from the short side using charts of 15-minute degree or less to identify promising entry points. The hourly chart is where you should look to assess trend strength and to pinpoint reversals. At the moment, it would take an upthrust exceeding 3.2565 to turn the 60-minute chart bullish. _______ UPDATE (April 28, 10:34 p.m. EDT):  Copper has bounced to 3.2890 off a 3.0684 low that left my downside target unsatisfied. The target remains compelling, and so we should be skeptical of this rally. It has achieved impulsive status on the 240-minute chart nonetheless, but just a little more weakness, exceeding a 3.1485 low recorded last Wednesday, would turn the 240-minute chart into a duel between bulls and bears (see inset, a fresh chart).

I'm at a loss to correlate it with the grim global economic picture, but March Copper has tripped a buy signal with this week's impulsive thrust on the daily chart.  Camouflageurs should recognize in the accompanying chart some favorable elements for creating a safe, bullish entry point. However, if we go strictly by the book, the futures have yet to pull back sufficiently to be considered recharged for a C-D follow-through thrust.  That will require a print at 3.7481 or lower, and it is only after this has occurred that you should zoom in on the lesser charts to pick your entry spot. _______ UPDATE (February 7 at 10:01 p.m. EST): Yesterday's weakness brought the futures into our bottoming window. Camo traders should look to the 15-minute chart for inspiration, Specifically, there's a 3.7535 'external' peak recorded Wednesday that could serve our purpose.

Copper has been running in place for nearly a year but is now on the verge of a bullish breakout that promises to keep prices buoyant, at least, in the months ahead. Notice in the chart how yesterday's rally came within 0.0005 points of an external peak recorded in May.  Although a 'b-c' pullback from here would diminish the imputed bullishness of any rally exceeding that peak, it would not negate the prospect of a bull market in its infancy.  On the other hand, a failure to surpass the peak -- and soon -- could consign the futures to indefinite meandering in the wilderness. Click here for information about the upcoming Hidden Pivot Webinar and a $50 coupon — or here for a free trial subscription.