China six interest rate reduction in less than a year, a move that follows 100 bp reduction in the reserve requirement, and unexpected revaluations of the yuan extends a coordinated effort to spur global economic growth and desire to skirt blame for triggering the inevitable global debt crisis.
While coordinated 'stimulus' supports a countertrend rally of commodities foreshadowed by negative concentration discussed months ago, it won't reverse global capital flows regardless of the hype. Copper, an economically-sensitive commodity, has been leading a cyclical downturn in the global economy for months.
Summary
The BEAR (Price) and BEAR (Leverage) trends under Q3 distribution as seasonality high approaches position copper as a continuing bear opportunity.
Price
Interactive Charts: JJC, JJC PF, COPPER
A negative long-term trend oscillator (LTCO) defines a down impulse from 38.78 to 23.60 since the first week of August 2014 (chart 1). The bears control the trend until reversed by a bullish crossover. Compression (white circles) within the CEC cycle generally anticipates this change.
A close above 35.23 jumps the creek and transitions the trend from long-term cause (building) to mark up. A close below 18.48 breaks the ice and transitions the trend to mark down.
Chart 1
Leverage
A positive long-term leverage oscillator (LTLO) defines a bear phase since the fourth week of November (chart 2). This focuses the down impulse (see price).
A diffusion index (DI) of -18% defines Q3 distribution (chart 3). A capitulation index (CAP) of 34% supports this message (chart 4). DI and CAP's trends, broader flows of leverage and sentiment from extreme distribution (red dotted line) to accumulation and extreme complacency (red dotted line) to fear supporting the bears (green arrows), should not only continue to extreme concentrations but also restrain upside expectations until reversed (see price). Continuation of the rally under these trends, a sign of strength (SOS), would be bullish for copper longer-term.
Chart 2
Chart 3
Chart 4
Time/Cycle
The 5-year seasonal cycle defines strength until the first week of February (chart 5). This path of least resistance restrains downside expectations (see price).
Chart 5