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Over the years Copper has been viewed as a leading global indicator for economic conditions and often stock market performance. The chart below takes a peek at year-to-date performance of Copper ETF (JJC), Freeport McMoran (FCX) and the S&P 500, showing weak performance in the Copper sector, with the opposite happening in the S&P 500.
So far in 2014, ole Doc Copper IS NOT a very good leading indicator for the S&P 500.
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The top chart reflects that Copper looks to have formed a “Bearish Descending Triangle.” This pattern two-thirds of the time suggests a decline in prices will take place, with the decline (B) being the height of the pattern (A). If this does take place, the pattern suggests Copper will fall at least to the $2 zone, about 30% below current prices.
In my humble opinion, the most important issue at hand is that Copper is testing long-term support at (1) and support is support until broken. Line (1) is based upon the lows in 2002 & 2009. Keep in mind, these dates represent times when the S&P was also at/near lows.
What Copper does at (1), should have a large impact on the future prices of Copper and if it does break support, could impact the S&P 500 too.
Stay tuned, what Copper does here, could have a big impact on the broad markets and portfolio construction!
