By: Brandon Rowley
Doctor Copper is one of the best indicators of global growth given its ubiquitous use in products we make all over the world. Copper has the characteristics of malleability and ductility while being one of the most efficient conductors of heat and electricity, locking in its spot as a commodity with broad usages. From wiring and circuits to fittings and pipings, copper is useful in a wide variety of products (and let's not forget the Statue of Liberty!)
With emerging economies exploding as the global credit crisis abates, demand for commodities is likewise rising aggressively. This demand has pushed prices back to all-time highs seen in 2006 and re-challenged in mid-2007. The $4.00 level in high grade copper looks likely to be broken in the near future as copper prices charge higher.
I have found Doctor Copper to be a quality leading indicator for stock prices and see it as unquestioningly bullish at the present time. A quick use of Nexalogic's handy correlation tool shows the correlation between the S&P 500 and copper JJC at a whopping 0.73 for the year 2010. Compare this with the oft-cited explanatory power of the US dollar UUP at a -0.36 correlation. In sum, copper continues to lead the way, challenging all-time highs. Should previous correlations hold up, the stock market is likely to follow it higher.
(Click chart to enlarge)
Disclosure: No positions