Copper, or Dr. Copper as some refer to it as since it has a tendency to ‘predict’ moves in equity markets, is at an interesting place right now. Below I am looking at a weekly chart of the commodity, with a 200-week moving average plotted alongside price. As you can see by the orange circles, since 2010 the 200-week MA has done a fairly good job of back stopping the price of copper. This is where this past week of trading found some (so far) potential support.
When we look at the popular RSI momentum indicator, we typically get a break of 30, or at least get pretty close to 30 prior to seeing a bottom made in copper. We aren’t quite as low as we have been on this momentum indicator as past bottoms, but as Mark Twain once said, “history doesn’t always repeat itself but it sure does rhyme.”
So we have a potential bullish situation in copper based on a moving average support area and a possible oversold RSI indicator. Lets see where traders positioned themselves in the futures market. The chart below shows us the COT data going back to 2007. As you can see, commercial traders are extremely net long copper futures, while small traders are very bearish towards the metal – just the combo bulls like to see.
One of the important things to remember when looking at copper is its strong ties to China. If China’s economy is in fact slowing, which we saw additional signs of this morning with their weaker industrial output and CPI data, then copper is likely to feel the impact.
Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer.
