FusionIQ’s Kevin Lane notes: Copper as seen on this weekly chart through last tick has broken two supports first near $ 50.00 (red line) and second (green line) near $ 46.00 – this free fall on volume is more indication that the market believes we are in a recession given copper’s ties as an economic metal.
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Source: FusionIQ
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
"Dollar depreciation leads to higher inflation and ultimately forces foreign creditors to question their rationale and indeed their sanity for continuing purchases of U.S. Treasuries." -Bill Gross
Signs continue that European markets are getting tired. The Spanish and Italian stock markets, big beneficiaries of the sharp decline in their bond yields over the past few months are falling to the lowest since Feb 1. The European bank index is at a 1 1/2 week low after earnings reports from Commerzbank and Credit Ag (RBS bouncing although reporting weaker than expected earnings) were disappointing. This market action is in spite of the German IFO business confidence figure which rose to a 7 month high coming in a touch above expectations and Italian consumer confidence which bounced more than...
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September 29th, 2011 at 11:40 am
How about some analysis of Shanghai Copper (CU futures) x Iron Ore x Steel Rebar in China?
September 29th, 2011 at 11:44 am
“the market believes we are in a recession”
Two Words: Meredith Whitney
September 29th, 2011 at 12:59 pm
Does copper retain its relevance for the economy after speculators begin to dominate its trade?
http://www.spiegel.de/international/business/bild-724140-143360.html
September 29th, 2011 at 1:22 pm
[...] Should Dr. Copper have his license revoked? (Minyanville also Big Picture) [...]
September 29th, 2011 at 1:24 pm
Are you sure that its not just the hedgies unwinding positions for cash redemptions? The silly quants were moving in to physical commodities after 08. Yes, I think we are in financial trouble with a very very very strong possibility of some serious calamity to follow shortly but I think we are looking at causation as opposed to correlation. Who knows, maybe we have another Hamanaka situation….
September 29th, 2011 at 1:58 pm
Copper going down?
Good deal for me, there has been no reason for the price of copper to remain high. I wouldn’t mind seeing a 50% drop back down to traditional prices. If it will do that over the next year then the next house I wire will be much cheaper.
Jack
September 29th, 2011 at 1:59 pm
Copper is probably a better indicator for China’s economy (and Chile’s, to be sure) than for the US. Take a look at this long-term copper chart:
http://www.mrci.com/pdf/hg.pdf
Ever since copper surged above $2.00/lb in 2005, its price has seemed divorced from the fundamentals. In principle, copper is not a $4.00/lb metal, or even a $3.00/lb metal, to my way of thinking. It’s just not that scarce, or costly to produce.
Copper’s decline certainly isn’t a positive indicator for the economy. But I would call this a normalization of copper’s price, rather than a crash.
September 29th, 2011 at 2:05 pm
BTW, looking at the 5 year chart on copper, one has to believe that copper trading has been in fantasy land. There is nothing about the economy the last 2 years that justify the prices of copper.
Jack
September 29th, 2011 at 2:08 pm
relying on copper as an indicator is no longer useful – one of those things that worked in a different era and economy but not anymore.
http://www.takingmoneyseriously.blogspot.com
September 29th, 2011 at 2:13 pm
Copper maybe useful as a leading indicator of what speculators are up to, thus give an indication of their involvement in the market in general.
September 29th, 2011 at 2:37 pm
So basically everyone is saying “this time it’s different” sounds like denial to me.
September 29th, 2011 at 2:39 pm
Since the time when the banks and other speculators of ginormous size (including in china) have moved into metals trading space (and in case of Goldman – owning the storage facilities as well) I do not believe that the “market” price of the metals is an indicator of anything but the banks’ own health/liquidity/ability to lever up/ability to loan to other speculators and, to a lesser extent, perhaps a start of the new pump & dump cycle.
September 29th, 2011 at 2:44 pm
“sounds like denial to me”
That does not exclude the possibility that it may also be reality.
September 29th, 2011 at 2:50 pm
where is the green line come from? red looks like last consolidation phase and purple looks like a retracement line, but what does the green line have to do w anything? thanks.
September 29th, 2011 at 3:01 pm
Copper purchases in China are extremely misleading. Another reason not to trust the “fundamentals.” Companies starved for credit have been importing copper and using it as collateral to finance domestic borrowing. This type of shadow financing is a signal that the Chinese credit bubble is soon to burst…still going but very tired.
September 29th, 2011 at 3:32 pm
Insert story here about how GS is ONCE AGAIN found to be manipulating this market by somehow scamming 10% of all copper supplies in the known universe
September 29th, 2011 at 3:35 pm
Funny thing, if the S&P500 falls another 2.5% (from where it is today), this year will make it to the “Top 10 Worst Years” for the index. The reason I say “funny thing” is that we are not even in a recession yet – at least not officially.
Currently, #10 spot is held by 1969 (-11.4%). The top 10 list + follow up years:
http://penguinsgoldenegg.blogspot.com/2008/03/double-digit-losing-years-s.html
September 29th, 2011 at 4:17 pm
Tangent to copper
Here’s some fun reading – why oil will never fall below $100 again – from 2008.
Nothing against the author – just fun to see how very logical/plausible arguments can be totally wrong.
http://www.dailyfueleconomytip.com/oil-prices/people-somewhat-optimistic-about-the-possibility-of-100-oil/
Survey says 60% of people think oil will never fall below $100 again. Easy to feel that way when oil is at $140 I guess.
Keeping it real…
September 29th, 2011 at 9:17 pm
The problem is knowing if the move up was legitimate. We all know about oil and housing and what the banksters involvement in these moves were.
If you ask me the biggest potential whack job will be if the ‘market’ realizes that the Greece debt haircut needs to be closer to 50%.
September 29th, 2011 at 10:20 pm
Then what was copper signaling during the economic meltdown of 2008 when it traded at higher prices than 2007? The US housing market topped (and presumably market demand in the US) in 2006. So if the demand came from China or other em’s, then maybe the lack of demand in those markets is to blame now.
Can’t see how the chart, which reflects a part of the world demand, can automatically be pointing to a US recession.
Quick, where is a chart of housing starts since 2004?
September 30th, 2011 at 5:56 am
copper 41$ in what metrics and what exchange?
September 30th, 2011 at 2:35 pm
A quick look at the build up in volumes during this year and the recent price action clearly shows that this chart simply reflects the activity of ‘speculators’.
It has no relation to reality or the physical supply & demand for copper & therefore does not qualify as an indicator of recession.
What is does show is that ‘specs.’ missed a great opportunity at the end of 2008!
September 30th, 2011 at 4:22 pm
[...] Barry Ritholz shows a nice chart that suggests copper’s downturn is one more signal that we’re headed for [...]
September 30th, 2011 at 10:27 pm
that is a chart for JJC, which is a copper based ETF. Physical copper is near 3.15 or so. That should be clarified.
also my largest short position, working out well. The break of 4.00 was an easy setup.