Posted on 05/09/2010 10:24:00 AM PDT by blam
Here's Why Copper Is Now Flashing A Huge Warning Sign For Stocks
Joe Weisenthal
May. 9, 2010, 10:33 AM
Good observation here from PragCap... Copper has now dipped below its 200-day moving average, a clear signal of a market in bear-market territory. Note it didn't quite do this during February's Scott Brown selloff.
Copper of course has a great reputation for being predictive. So, basically, watch out.
[snip]
(Excerpt) Read more at businessinsider.com ...
It’s all coming together isn’t it.
Excuse me, but the price of copper soared in the months leading up to and through the bank crisis and economic collapse of 2008. I don’t know a whole hell of a lot about the copper market, but from that alone, it looks like a pretty crappy indicator of economic activity.
VERY interesting graph. The last time the price was below the 200-day moving average was May of last year. The point previous to that was July 2008. It does look like a pretty good predictor, especially when you look at the underlying industries that rely on copper as in important raw material....
hh
Is this a warning for gold too?
Monday is going to be very interesting. Get your orders in early.
Is it because it is used in so many products that a decline in its price means a softening of the market in general? Or is there some other, more arcane reason?
I wish writers of such articles would be a bit more descriptive.
It looks like it crossed over 6-8 weeks before everything became apparent to the rest of us. Not a lot of warning, but there, nonetheless.....
hh
Yup. No more complicated than that.
The fall in February looks worse to me, but I’m only looking at a graph.
List from Yahoo! answers:
Copper use by functions in US:
#1 Electrical – 58% (wire)
#2 Corrosion resistance – 22% (pipes)
#3 Heat transfer – 12% (radiators, etc.)
#4 Structural – 6%
#5 Aesthetics – 2%
Copper end-use market in US:
#1 Building construction – 46.3%
#2 Electrical and electronic products – 22.7%
#3 Transportation equipment – 10.2%
#4 Consumer and general products – 10.9%
#5 Industrial machinery and equipment – 9.9%
hh
Thx much!
Based on this analysis, the important points are where the price range (red/black vertical lines) cross over the smooth red line (the 200-day moving average)....
hh
These “indicators” do not necessarily mean what they used to mean on a pure 1:1 basis, each time, every time. There are times when volatility in the equities markets drives institutions (or other buyers) into commodities...and not all commodities become the recipients of hot money as do gold and some metals. The effect is decidedly non-uniform: Silver does not act the same way as gold, because it’s also (much more than gold) an industrial metal.
In this case, I would tend to agree that copper is flashing a warning. However, the much brighter warning light right now, IMHO, is oil.
Nope. Gold and silver are trading as the alternatives to currency that they are. Copper is trading as a metal used in construction, which is going to get worse instead of better.
“Monday is going to be very interesting. Get your orders in early.”
http://www.youtube.com/watch?v=S8H2FIf1oH4
Is it because it is used in so many products that a decline in its price means a softening of the market in general?>>>>>>>>>
That’s the reasoning. It is so widely used.. Loads of industrial uses behind the scenes. On the more obvious consumer level it is used in every appliance and electrical and electronic item. In TVs. For wiring houses. In computers and computer related items. You get the idea
So lower Cu price usually means less CU demand so less “stuff” being made and sold
Tx. I got tears from laughing so hard. Perfect...
Here’s a link to the futures market, which gives some good lead time as to how things are developing.
http://www.bloomberg.com/markets/stocks/futures.html
It probably wasn’t a good indicator in 2008, construction was still doing well with the exception of the housing market.
I’d say now it’s more relevant, and is definite proof that building is going to stay down the tubes.
(I can remember I sold a 150 ft cable wire for about 180 dollars with the rubber still on it. If it had been stripped I would have got around 290 for it.)
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