Wednesday, November 2, 2016
Is copper about to turn up?
Energy and Gold:
Something important is happening with copper; the reddish brown metal has risen for seven consecutive trading sessions on heavy volume and today it broke out from the 10-month symmetrical triangle. If the breakout holds on a weekly closing basis the measured move target will be $2.60+. A move above $2.30 would add extra significance to the rally because it would decisively snap the string of lower highs and confirm that a nascent uptrend is underway.
Bears can talk about copper inventory overhangs and a China economic meltdown all they want. Something big is happening in the copper chart and after a 5-year bear market which has reduced new exploration activity to a trickle, a monumental turning point may be at hand. The potential implications of a turn in the copper market for other markets and asset classes is also worth pondering; copper has historically been considered to be an important leading indicator of economic activity in the US and emerging markets (copper and EEM both bottomed in January 2016).
Commodities were in a five year bear market. I said earlier this year that the commodity bear market was over and we were looking at a cyclical recovery. We have seen both oil and gold go up massively this year. Now it appears that one of the best indicators for economic growth, the copper price, is poised to break out to the upside.
If the copper price does in fact break out this will bode well for other industrial commodities and will certainly benefit many of my holdings like Altius Minerals, Nevsun, and my investments is Mongolia.