CLICK ON CHART TO ENLARGE
Copper continues reflect decent relative strength since its breakout on 12/1, compared to the more popular metals.
CLICK ON CHART TO ENLARGE
Copper and the China ETF (FXI) have reflected a very high correclation over the past couple of years, yet this month the story has really changed, per FXI is weak and JCC is very strong. Does anyone know which one is telling the truth???
Game Plan…Keep a 3% trailing stop on JJC in case prices change direction.
I had been watching copper and with the rising wedge intersecting the triple top point, thought it would bounce off the top then break down. Obviously it didn’t.
But there is more going on here and the hint is in the correlation chart.
JP Morgan is about to launch a copper ETF. Commodity ETF guidelines are that the ETF is backed by the physical commodity. JPM has been buying up the control of copper by the boat load. Apparently they control 50% of the London Metal Exchange (LME) stocks with some estimates being as high ast 80%. This buying by JPM is the likely reason for the breakout.
It’s hard to say what happens once the ETF launches. At the current high price, I would be reluctant to jump on board and if the general market feels the same way, JPM may have to shed copper if the ETF is under-subscribed. On the other hand, if the general market thinks copper will go up forever, they may jump on board.
At this point, if not in copper, I would wait until the charts appear to have topped and then short with a vengence.
The second chart might suggest that soaring copper prices are not caused by high industrial demand from rapidly growing emerging countries, but rather from speculation… I am really looking forward to scoring on defense on the whole base metals complex, when the time is ripe… should be a rather nice ride!
Some guy in the UK has cornered the physical market in Copper, that may have something to do with it. But also a 3 year chart shows that Copper has left FXI in the dust from the middle of 2009.
Hi Chris,
I don’t know why copper and Shanghai index are no longer correlating. Is it possible that copper is being treated as a safe haven for currency, similar to gold, silver, oil, etc? Could commodities and US markets be the last to roll-over?
Happy New Year!
Tom
Great observation on the correlation, err…decorrelating. I wonder what this is telling us? Maybe the world economy continuing to strengthen without China?