Some feel the price action of Copper is important to watch, because it could send important macro messages, about world wide growth or lack of. ┬áSince 2011 Ole “Doc Copper” has been very weak, no question about it. During this weakness, the S&P 500 has continued to move higher. So is the price action of Doc Copper not useful or relevant anymore?

Below looks at ratio of Copper to the S&P 500-

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Doc Copper has clearly been weaker than the S&P 500 since 2011 and the Long-Term trend remains down, as the ratio continues to create a series of lower highs and lower lows.

The short-term trend is attempting to turn higher as the Copper/SPY ratio is testing a cluster of resistance at (1).

If a breakout happens, the suggested message would be to; long Copper and Short the S&P 500, if one is comfortable with a pair trade. If a breakout does take place, other potential beneficiaries could be FCX, RIO or JJC.

Even though Ole Doc Copper might not have sent a valuable message to the S&P 500 over the past 6-years to some, we humbly feel if a breakout takes place at (1), investors should be aware of opportunities that could present themselves in the hard hit sector.

 

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