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I am an equity option and futures trader. I have been trading the markets since 1979. More about me on my website
My blog:
Beyond the Chart
My book:
7 Keys to Successful Option Trading
  • What Is Copper Telling Us? 0 comments
    Aug 27, 2014 8:30 PM | about stocks: JJC, RAX, STX

    Copper MineCopper has many uses but it is most widely used in construction. So many people look at copper as an indicator of the strength of the economy both globally and the United States. The United States is the largest economy in the world based on GDP and China is number two. So what is copper telling us about the world economy?

    So let's take a look at a weekly chart of JJC which is the iPath-UBS Copper Tr Sub Index ETN. ETN stands for Exchange Traded Note.

    (click to enlarge)Weekly Chart of JJC

    This chart is a weekly chart of JJC from late 2007 thru last week. (click on chart to enlarge) JJC tracks the price of copper and as you can see, it dropped dramatically in 2008 as did almost all commodities and the stock markets of the world. It bounced back in 2009 and 2010 and in early 2011 slightly exceeded the 2008 top.

    Head & Shoulders Top

    What clearly jumps out at you is the large Head & Shoulders (H&S) top. It broke down through the neckline (NL on the chart) on April 19, 2013. It has been in a solid downtrend ever since the peak in February 2011 with lower lows and lower highs on the rallies.

    The H&S pattern projects to around 26. (see the blue vertical bar). The move since the initial neckline break 18 months ago has been rather sluggish but the trend is clear. So far the low was 34.88 the week ending March 21, 2014. That hit a level not seen since week of July 31, 2009.

    So look at this picture and compare it to the stock market. Also think about all the money that's been injected into the global system. Yet this is the story copper is telling.

    A penny ain't what it use to be

    You can't tell a penny by its color. Prior to 1983, all pennies, officially called "cent", made in the United States consisted of 95% copper. Since 1983 pennies contain 2.5% copper. So that copper penny only looks like copper. The government made the change because the value of the copper in the coin was exceeding the value of the coin itself.

    In Focus

    In tonight's video I take a look at the market action of the last two days...not much, 2 S&P points. Today we also take our weekly walk around the globe, looking at the BRICS countries. I also update on trade ideas.

    Stocks: JJC, RAX, STX
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