Lead Indicator Faces Dual Resistance Kiss
Chris Kimble | May 19, 2015 02:14PM ET
Copper is often looked at as a leading indicator and, lately, it's been hot. Over the past 90 days, copper ranks third from a performance perspective (see table below). But on a longer-term basis, ole Doc Copper doesn’t have much to brag about.
For the past few years, copper has been weak, losing over a third of its value. Earlier this year, the metal's decline took it below support (1) that had been in place for over 10 years. Now a key kiss is taking place on the underside of this resistance.
This monthly chart shows that copper’s recent rally now has it “kissing the underside of dual resistance” at (2) above. If Doc Copper does happen to be a leading indicator for global growth or activity, what it does at (2) could be very important. Has copper's rally been influenced by a rally in China's stock markets?
China represents one-sixth of the worlds population and its Shanghai Composite has done rather well this year -- up 100% since last July. The rally has taken it up to a key Fibonacci resistance level.
Is it possible that what Doc Copper does at (2) and the Shanghai index do at the Fibonacci 61% level will shed some light on global growth, or lack thereof? How each of these handle resistance could tell us a good deal in regards to the inflation/deflation battle that continues to be in question.
Bonds have been hit hard of late, heading in the exact opposite direction as copper. If the metal fails to break above dual resistance, then I humbly suspect that bond investors will react in a positive way.
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