Time To Take Your Temperature With Dr. Copper
Due to the growth of commodity hedge funds, globalization, and the central bank monetary policy, all commodity market are somewhat correlated with outside markets such as Currency prices, Equity values, etc. On benchmark that is often looked at is the price of copper, aka Dr. Copper. According to Investopedia: Doctor Copper is market lingo for the base metal that is reputed to have a Ph.D. in economics because of its ability to predict turning points in the global economy. Because of copper’s widespread applications in most sectors of the economy — from homes and factories to electronics and power generation and transmission — demand for copper is often viewed as a reliable leading indicator of economic health. This demand is reflected in the market price of copper. Generally, rising copper prices suggest strong copper demand and, hence, a growing global economy, while declining copper prices may indicate sluggish demand and an imminent economic slowdown.
It should be noted that this benchmark can have its limitations during times of trade tariffs and/or major supply/demand imbalances in the copper market.
That being said, it is good from time to time to check in and see what the forecast is for an outside market influence like copper.
Looking at a continuous daily chart:
The immediate trend appears to be lower in a wave © of b that should last into the fall of 2019. Current price action remains within parallel lines, suggesting some sort of correction. Expectations are for prices to continue lower to the lower boundary line of the price channel, targeting the $2.15-$2.25 area. This forecast is emboldened by the fact that there is a cluster of targets all pointing to the same area.
- $2.24 is where wave © = wave @
- $2.23 is where wave b retraces .782 of wave a (common in zig-zags)
- Near the lower boundary line in the time we would expect the market to reverse.
If you believe in the Dr. Copper theory and relationship, it would suggest that the economy will be slowing through 2019. This will put a negative tint on most commodity prices.
However, once this wave © of b wave is complete; expectations are for the intermediate trend (higher) to re-establish itself. This can be seen on the weekly chart below. Here, we would expect a multi-month, multi-year rally that has prices targeting $6.00, where wave c would equal wave a (a common Fibonacci relationship between waves A and C.