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While the markets have continued to melt higher on the hopes of perpetual Fed easing and “better than expected” earnings, some interesting divergences are occurring. In particular, copper prices and the Shanghai Composite are in retreat.

The Shanghai Index has proven to be a particularly good leading index in recent years. While the recent divergence is short-lived, it is worth keeping an eye on. Slower growth in Asia would be foreshadowed by its equity markets (which have a very high correlation with commodity prices and copper in particular) and, as I’ve continually said, slower growth in Asia would be very troubling for a western world that is barely holding onto a sustainable recovery.

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The Shanghai Composite is down 5% in the last few weeks

Copper just can’t seem to catch a bid in this raging commodity bull market.

Source: Copper Prices, Shanghai Composite Retreat