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Technically Speaking For The Week Of July 30-August 3

Aug. 05, 2018 1:26 PM ET
Hale Stewart profile picture
Hale Stewart


  • Copper prices have taken a dive since the trade wars heated up.
  • Comments in the latest ISM Manufacturing survey show that tariffs are dominating the industry -- and not in a good way.
  • Market valuations are still very stretched.

Doctor Copper isn't happy: because of its ubiquitousness as a raw material, economists often add the adjective "doctor" before the word copper. There is also a strong historical correlation between copper prices and overall economic activity. That's why this weekly chart is causing some traders and economists to raise an eyebrow:

Copper rallied from the end of 2016 to the beginning of 2018; the ETF rose from the lower 20s to the upper 30s. Prices consolidated gains from the 3Q17 to the 1Q18. They're now below the 200-week EMA and are trading right at the 50% Fibonacci retracement level.

This may not be the be all and end all, however. Copper's decline occurred as the trade wars were heating up, implying that, should they cool down, copper will stop selling off.

We're starting to see anecdotal discussion about tariffs and trade policy. Every month's ISM manufacturing index release contains an anecdotal section. The survey uses a single quote to represent what a larger number of respondents are saying or thinking. Here are the screen grabs of this month's comments with the discussion about tariffs circled in red:

Tariffs are dominating the discussion -- and not in a good way. Prices are increasing; business is looking to change their plans (which will lead to higher expenses); China has stopped taking orders. Here's a general macroeconomic rule: anecdotal information presages hard data. We now have comments from industry participants -- A LOT OF COMMENTS -- that show tariffs are now "the" topic of conversation. If this trend continues, expect to see negative data results in the next 3-6 months.

The market is very expensive: I've carped on the market's valuation on numerous occasions over the last few years and simply wanted to return to my complaining ways. The following two charts are from

This article was written by

Hale Stewart profile picture
Hale Stewart spent 5 years as a bond broker in the late 1990s before returning to law school in the early 2000s. He is currently a tax lawyer in Houston, Texas. He has an LLM in domestic and international taxation (MagnaCumLaude). He is the author of the book The Lifetime Income Security Solution. Follow me on Twitter at @originalbonddadYou can read his legal analysis on his law office's blog.

Analyst’s 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 (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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