Media pundits typically refer to copper as “Dr. Copper” as its price action is used to deduce the overall health of the economy but in the age of equality, let’s refer to copper as “Nurse Copper.” Prices are down 10% from levels seen 6/5 when we started to roll over, but two key developments happened when $3 was rejected (I think we bounce from here) and in China the stock exchange rallied after being down 5% to close flat as a V-shaped recovery may be upon us. It's too early to tell if these two markets will recover in the coming weeks, but as I gaze into my crystal ball those are my two prognostications. As for copper, at a minimum I expect to see a trade back to the 38.2% Fibonacci level back to $3.29, as seen on chart below.
Not The End Of The World
This is not meant to be construed as a buy recommendation on Chinese securities or to pile into Phelps Dodge (PD) or longs in copper futures but more so to paint a picture that it is not the end of the world. Yes, even if Central banks take their foot of the gas pedal global economies will be all right. I expect a rebound in a number of risk assets in the immediate future.
Waiting On Risk's Return
As always when I write about copper and the U.S. dollar, it's more as a guide to help navigate trade with other commodity markets that exhibit a relationship. As long as copper holds its recent lows and starts tracking higher, I would expect there to be an appetite for risk to return to the market.
That said:
- Domestic stock indices appear to be finding support at their 100-day MA.
- Crude oil and the products are a buy in my eyes.
- The commodity currencies (Kiwi, Aussie, and Loonie) are beaten down too much.
- Select softs and Ags are a buy ahead of Fridays USDA report.