Technical analyst and newsletter writer Clive Maund explores the link between an anticipated copper rally and an upswing in Chinese markets.
In marked contrast to gold, copper looks to be set up for a sizable rally here. On its one-year chart, we can see that after its significant drop during May and early June, it is down on an important support level that is certainly capable of generating a rally, despite its still bearishly aligned moving averages…
The chances of copper rallying soon are greatly magnified by its latest COTs, which show that the Commercials are now heavily long, while the normally wrong Large Specs are heavily short - this is the setup for a rally, and one reason for selecting a one-year time frame for the copper chart above is so that you can compare past peaks and troughs with the readings on the COT chart, which also goes back a year.
Since the price of copper is to a large extent determined by what goes on in China, which is by far its biggest market, this bullish copper setup prompts thoughts about the outlook for the Chinese market. The Chinese stock markets have had a really rough time over the past year, with an army of "get rich quick merchants" being put through the meat grinder after they generated a bubble rally.
On the three-year chart for the Shanghai Composite, it looks at first glance like the market is set up for another down leg, after trundling sideways for most of this year. And it may yet, but with downside momentum easing after its earlier severe losses, and some bunching of price and moving averages, the chances of an upside breakout, although still not great, are starting to improve, and the now positive medium-term outlook for copper provides some circumstantial evidence that this might occur.
Your attention is drawn to a couple of articles that I found interesting but you may not have seen. One is an article in ZeroHedge on The American Dream, and the other is an interesting article by David Stockman entitled Bubble News from the Nosebleed Section. I don't necessarily agree with Stockman, but this article is certainly a highly amusing read, as many of his articles are.
1) Statements and opinions expressed are the opinions of Clive Maund and not of Streetwise Reports or its officers. Clive Maund is wholly responsible for the validity of the statements. Streetwise Reports was not involved in any aspect of the content preparation or editing so the author could speak independently about the sector. Clive Maund was not paid by Streetwise Reports LLC for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
3) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.
All charts courtesy of Clive Maund
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.