Monday, May 12, 2014

COPPER Weekly and Daily Charts

Copper created the market recovery on Friday and sent the Dow to a new all-time record closing high. Doctor Copper has been in sick bay for over one year and it is remarkable that the stock market prints new highs. Note the collapse in early 2013. In normal markets, stocks would have weakened following copper and perhaps printing a sideways to sideways down year. Instead, the equity markets catapult +30% in 2013 fueled by the weak yen (BOJ money prnting), continued Fed QE easy money and buybacks. Now there is an ongoing M&A orgy occurring in markets receiving the baton hand off from the buybacks. The gimmicks and tricks are ongoing but the bulls should run out of this central banker intervention rope at some point forward. The drop in copper, that does not have a negative effect on the stock market, is purely a result of central banker intervention.

Long-time readers remember the drama with the long-term red symmetrical triangle pattern that resolved in collapse. The downside target is 2.40 but price has bounced from the 2.90-3.00 area. The green lines on the weekly chart show positive divergence that created the bottom in price. The tight bands squeezed out the strong move lower this year where copper fell under the psychological 3.00 level. The lower band was violated so a move back to the middle band, at a minimum, is expected at 3.16, and price explodes higher this morning rocketing above 3.15. The dark descending triangle must be monitored which points to a dire outcome for the economy and markets in the year or two ahead. Price failure in this area could not only lead to the 2.40 target but down to 2.00 and even a potential one handle. This scenario would be in concert with the dire deflation scenario.

The daily chart shows the positive divergence bottom in March. The bands are tight on the daily so jumpy action is expected. Robust copper is pushing the stock market higher to begin the new week of trading. Price tags the top rail of the upward-sloping red channel and is above the 20 and 50-day MA's. The 20-day MA is crossing above the 50-day MA which is a bullish signal. Price may want to back kiss the 200-day MA again. Note the thin red lines in the right margin for the indicators. Check them tonight since this chart is from Friday. Price is now higher compared to two weeks ago so watch to see if the negative divergence remains, or not. Price may want to move sideways through 3.00-3.20 for a month or two. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

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