Copper is the popular girl at the party these days. Gold is asking why it looks like chopped liver. Everyone wants to dance with the other yellow metal. Strategists, analysts, traders and investors are singing from the same hymn sheet that copper will continue flying into the stratosphere. Everyone universally agrees that the US and world economy will recover quickly from here forward. The drug stores cannot keep sunglasses in stock since everyone sees nothing but blue skies and rainbows ahead.
Look at that demand! Did you see the demand? Why the demand will go through the roof this year! Look at that supercycle! What? Is that a new type of stationary bike? No, you dumbie, supercycle! Copper will go up and up for the next decade! Jump on board! No thanks.
Every now and then an analyst burps or coughs and it sounds like he said supply. Other than that, it is all about copper and the huge demand going forward. The two biggest users of copper are housing and autos so it is key that these industries are robust to justify copper prices. Housing is feeling love as some folks want to move out of the city due to the ongoing coronavirus (COVID-19) pandemic, however, once they are kept awake all night because they are not used to listening to crickets instead of car doors and street noises, some will move back to the city.
Just think of the copper pipe Texas is going to need after that debacle. A burst pipe is not that big a deal. It depends on where it bursts. If it is easy to get to, hacksaw the section out, clean the ends, use two copper unions, flux it all up, shoot the propane cylinder heat to it, lay the solder in the joints, done, turn the water back on, go back to watching television. It can be fixed in a half hour, or, if you do not have common sense skills, you will wait two weeks for the plumber that will charge you $200 or more for that repair that costs $10 bucks and is easy as punch to fix if you have self confidence.
Electric vehicles are all the rage, if you are in the know you tout the hip jargon, "EV." Motors need a lot of copper windings. Why would you buy an electric car when there is a gas station on every corner? Are you stupid?
The blue lines show the H&S highlighted 2 or 3 weeks ago. The purple arrows show tight bands that are about to squeeze out big moves and both were up. When price went above the head level of the H&S, the head and shoulders pattern was nullified. What happens with this type of behavior is the spike turns into a head and over time, price comes back down, forms a right shoulder and then tests the neck again at 3.5 but this is likely a couple months out.
The Peru chart is provided courtesy of Worldometer and annotated by Keystone. 9,667 Peruvians became sick with covid on 2/18/21 only 5 days ago the second worst day in the history of the pandemic. Those folks are sick as dogs. Worse, about 40% to 60% of the new infections are Peruvians that already had coronavirus months earlier. This is not good. There may be a nasty new covid variant strain in play in the world's copper fields.
Supply is the problem. Comically, there are likely only three short guys in colorful alpaca shawls running the copper mine in Peru, Chile and Bolivia for the entire world; one running the shovel, one driving the truck and the other running the wash plant. No wonder copper is a moon shot. It is time for Keystone to take two barrels of copper scrap to the junk yard.
The green circle shows when Peru announced a lockdown that would run to 2/14/21 so that expired a few days ago. Peru is likely trying to get back on its feet now but with daily new cases at record highs, things may be rocky for another couple weeks or so. Thus, the copper story likely has a lot to do with supply concerns as well as the demand hype.
In the US, 10 million people remain out of work for gosh sakes. Add another 10 million that are gig workers and underemployed folks working to just get by. These people are not going out to buy a house or a fancy glorified golf cart car. The pent-up demand everyone expects is going to be a bump in air travel for 2 months, which will be the wealthy taking a vacation trip, but all that will likely fade quickly after the privileged class, that are given vast wealth by the central banks, enjoy some play time.
The red lines show overbot RSI and stochastics and neggie d on the stoch's so a pullback on the daily for a day or two is in order then back up again because of the long and strong indicators (green lines). The daily will probably top out in about 4 days say Friday or Monday. That pullback will conspire with the neggie d on the weekly chart for probably a couple-week pullback. The weekly chart is going to top out in probably 1 to 2 weeks. The copper monthly chart is in partial neggie d but the RSI and MACD want copper to come back up, on the monthly basis, after the multi-week decline.
What does all that mumbo-jumbo mean? Copper will chop at elevated levels for the next 2 weeks. Watch the copper weekly chart since it will identify the top, on the weekly basis, when the MACD goes neggie d probably in 1 or 2 weeks. That will be a multi-week slide but then back up as stated with the monthly. So chop into early March, then copper retreats for several weeks, say into ealy or mid-April, then a rally again back up to the current highs, say in May, and that is the top for copper for the year, price should move sideways to sideways lower into year end from there. Interesting. This analysis is 180 degrees away from every Wall Street analyst that says copper will continue spiking to the moon.
Keystone does not have any trades on long or short in copper. COPX, SCCO and CPER are three tickers to watch. In a week or two, when the copper weekly chart goes completely neggie d, Keystone will consider shorting one of these tickers. Watch the MACD line on the weekly charts. When it turns neggie d to join the other indicators, that is the top, but do not get greedy, ride it lower for 2 or 3 weeks and get out. There will be dip-buyers wanting to reenter still believing in all that supercycle jazz. 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.
Note Added 11 AM EST: GS commodity expert Jeffrey Currie talks about copper on Bloomberg. Add him to the list; another person that does not mention coronavirus (COVID-19) in Peru. Everybody touts the demand side for copper expecting a glorious recovery. 20 million Americans that are unemployed and underemployed are not demanding anything unless they can get a decent job and money in their hands. Humorously, those three little men in Peru, Chile and Bolivia, are hurrying around the world's copper mine, each wearing a colorful alpaca poncho, one running the shovel, one running the truck and one running the wash plant. They are doing the best they can.
Note Added Friday Morning, 2/26/21, at 6:02 AM EST: Copper pulls back -1% on 2/25/21 but there is sill upside momo there.
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