COPPER Weekly Chart Broken Trend Lines H&S Gap

Dr. Copper. Note how copper is a leader (red circles) since it bottomed in the middle of the 2008 crash, three months before the March 2009, indicating recovery ahead and also bottomed a month or so before the August 2010 Chairman Bernanke QE 2 recovery. No sign of that currently, only weakness. The long term blue lower trend line failed early this year, as Keystone pointed out in the spring time, and the teal trend line also failed a couple months ago. This leaves copper with an H&S top (black lines), with a neck line that has just failed at 4, targeting 3.4 which is also horizontal support and a juicy gap fill (green circle), giving this target street cred.

Note the lower price trend line in the back half of 2009 into 2010. This occurs with all the indicators sloping down so the bounce in summer 2010 was a Bernanke savior anticipatory bounce, not a bounce due to positive divergence, thus, it hints that the downside in copper needs to be explored again in the future. The future is now, as the saying goes. The black circles show the indicators all with lower lows but price is perhaps 25% higher, think of this as a weight hanging on price dragging it south, and the top already occurred earlier this year.

The picture-perfect negative divergence (blue lines) in Jan-Feb 2011, as well as overbot conditions and the spectacular long term rising wedge, all created the firm spank down. Over the last couple months notice how price is a smidge lower and the indicators are sloping down, albeit slightly, as well, with no firm sign of positive divergence to bounce price. But, if you consider at the support provided at 3.75, the case may be made for positive divergence with the MACD histo, stochastics and money flow shown by the thin black lines. MACD and RSI remain more agreeable to further weakness, however.

What does all this mean? Since the neckline at 4 just gave way, a back kiss would be in order there. Projection is a move to 3.75, then assess a possible relief bounce, then ultimately the H&S target and gap fill at 3.4 should occur as the holiday's draw near.  3.22 is a support target as well and also the 200 week MA.  As with all commodities, the moves off the top are violent and spectacular. When a commodity falls, it leaves a mark.  Keystone projected a copper collapse in his 2011 predictions last December so we now see if that outcome shows.

Of major interest is the coming behavior with anecdotal copper hoarding over the last couple years. Again, with all commodities, as they move up, folks stock pile the commodity since higher prices can be realized down the road. As price collapses, the inventory holders panic and run to market to cash in their hoards before prices fall further, but all this does is exacerbate a price collapse. This story plays out over and over in the commodities markets time and time again. Thus, the coming weeks and months watch copper on a daily basis. Without copper buoyancy, there is no global recovery, only global contraction. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here or any links attached to this site. Consult your financial advisor before making any investment decision.