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A key barometer for the global economy, copper, broke through key support today, sending out a...

A key barometer for the global economy, copper, broke through key support today, sending out a danger signal for the metal and possibly stocks and other risk assets as well. The metal finished the day at $3.1875, its first close below key $3.20 support since October 2011. "It reminds me a lot of gold before that big breakdown," says Auerbach Grayson's Richard Ross. "This is the first significant break in two years," Ross says, and when gold broke below that level it broke hard. Ross thinks copper is setting itself up for precisely that type of move.
Comments (9)
  • Philip Marlowe
    , contributor
    Comments (1243) | Send Message
     
    Copper is not that much of a barometer of the global economy anymore.

     

    During the 2000s amid the multiple rounds of financial deregulation it became trendy to invest in commodities. This resulted in sharp price increases for copper and all kinds of other commodities. Those increases were not the result of the underlying economy but merely the result of a bunch speculative money coming into those asset classes.

     

    Similarly the drops we are seeing now are not the result of weakening of the economy but the result of these investments being finally unwound.
    17 Apr 2013, 08:40 PM Reply Like
  • Joe2922
    , contributor
    Comments (435) | Send Message
     
    Copper may be a financial instrument for the Chinese more than an eco-barometer, who knows, but the entire commodity sector, bonds, portend the same slowing economy that the govt. agencies do, IMF, etc., and revenues in total can't grow faster than the global gdp.
    Bear cycle underway, and THE top may be in now:
    http://bit.ly/WpVqYk

     

    Even Zacks wrote today earnings estimates are way too high for 2H-13 and 2014.
    17 Apr 2013, 09:38 PM Reply Like
  • Philip Marlowe
    , contributor
    Comments (1243) | Send Message
     
    Joe, all economic indicators point to economic growth that is slower than previously forecast but it is still growth. This does not necessarily result in a bearish stock market, especially for a market that is coming from a generally depressed post crisis state.
    17 Apr 2013, 10:19 PM Reply Like
  • Joe2922
    , contributor
    Comments (435) | Send Message
     
    But estimates are still too high, and disappointing results won't help stocks.
    17 Apr 2013, 10:26 PM Reply Like
  • Ted Bear
    , contributor
    Comments (640) | Send Message
     
    There are SO many things which fall under the 'it's different this time' mantra, but in the end, when the market collapses people will look back and say, well, duh, it was obvious...

     

    Revenue growth (or lack thereof), trillion dollar deficits (with interest rates at zero), poor market breadth, low volume, failure to make new highs by too many stocks, non-confirmations by MANY markets (NASDAQ and Transportations, for Instance), high unemployment, NO job creation even though we are pumping a trillion dollars a year into the economy, political shenanigans which have created HUGE wealth inequities, unpunished criminal behavior (think MF Golbal (stealing customer funds), BAC (fraud in the purchase of Merrill) or MS (insider trading by the CEO) and a host of other things which 'dont matter because it is different this time'.

     

    It isn't different this time, but maybe the timing is different. Free money for four years has attempted to mask the message, but that we face the same environment with the same likely consequences as we did in the thrities is unavoidable. THAT is the message which copper is delivering. That is the message that gold sent this past week: We are in a deflationary environement, which is a horror show of unequaled proportions to the Fed. When you are borrowed up the kazoo, what is the BEST antidote to your problems? Inflation, and we aint got none.

     

    If you are not listening, or pretending not to hear it, you do so at your own peril.
    17 Apr 2013, 08:59 PM Reply Like
  • bjamesh
    , contributor
    Comments (149) | Send Message
     
    I see it the same way TBear. When there is a race to the bottom in labour costs (off-shoring), higher levels of automation, money printing (by whatever name) and lowering of tax rates by competing juristictions (local and national), it is no surprise that at some point deflation will raise its ugly head. The tipping point may well have been reached.
    17 Apr 2013, 09:44 PM Reply Like
  • nemonemo
    , contributor
    Comments (333) | Send Message
     
    All the bearishness points to buy signal. Nothing but big players shorting and manipulating commodities.
    17 Apr 2013, 09:41 PM Reply Like
  • justaminute
    , contributor
    Comments (906) | Send Message
     
    It's not that simple. Let's mark today on the calendar and check back in 6 months.
    18 Apr 2013, 12:42 AM Reply Like
  • kmi
    , contributor
    Comments (4400) | Send Message
     
    Dr. Copper is absolutely giving us hints as to where and how the global economy will move. There have been huge gains in production of commodities over the last decade, and recent slowdowns in consumption hadn't been reflected in the price because of the financialization of commodities.

     

    More recently, we've seen huge gains in productivity and efficiency, which are further bearish on commodity consumption. This is pure supply-demand, folks. We are using less to produce more while at the same time we have been mining the bejeezus out of it, and people are consuming fewer products of which it is a component.

     

    Decreasing costs for commodities plus decreasing consumption mean prices will go down. Now let's guess what that means for the values of goods and products... and what impact that will have on the dollar, real estate, interest rates, and the economy at large.... who wants to guess...
    18 Apr 2013, 07:45 AM Reply Like
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