Doug Kass points us to this chart (from “Fast Money’s” Steve Cortes) depicting copper’s price with the S&P 500.

Source: Bloomberg

Category: Commodities, Data Analysis, Economy

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18 Responses to “King Copper and a New Low in the Shanghai Index”

  1. UH OH!

    If there is one thing I respect it is Doctor Copper economic opinions

  2. vader says:

    The only concern I’d have if the dip is not from less demand for consumption, but less speculation.

  3. dead hobo says:

    Dec 11 copper is 3.17 at this moment. Copper is probably the most realistic commodity for estimating the true state of the markets at this time. A couple of years ago it was an absolute indicator for a buy or sell signal. Stories of Chinese hoarding and uncertainties regarding the liquidity of the actual metal have made me less confident of the reliability of copper as an indicator. The LME and GS warehousing practices have allowed aluminum to become an asset as opposed to a consumable. This made me wonder about copper and its susceptibility to price manipulation in the same way.

    That being said, the elevator is heading down and copper told you so.

  4. icm63 says:

    Copper has a well known cycle that said SELL…did you…

    Copper and Dow Transports indicators of world growth http://www.readtheticker.com/Pages/Blog1.aspx?65tf=345_copper-and-dow-transports-indicators-of-world-growth-2011-09

  5. machinehead says:

    Copper has been mostly in gear with equities during the past decade. But in the Nineties, copper drifted lower with other commodities, while stocks were bubbling skyward.

    Copper is likely to be closer correlated with the EEM emerging markets ETF, since copper is a good proxy for Chinese demand. Both copper and EEM are acting sicker than the S&P.

    Meanwhile, VIX crept back above 40 for about ten minutes, just after lunchtime today. Ding, ding, ding! These blue-light specials don’t last for long. Bring your checkbook!

  6. dead hobo says:

    machinehead Says:
    September 28th, 2011 at 3:02 pm

    Copper is likely to be closer correlated with the EEM emerging markets ETF, since copper is a good proxy for Chinese demand. Both copper and EEM are acting sicker than the S&P.

    reply:
    ————–
    In days gone by, copper in free fall was a sell signal … I mean sell without question unless something obvious was a mitigating factor. Likewise, the market in free fall with copper stable said “Chill, wait it out … no biggie.”

    If copper in free fall is still a leading indicator … I mean by a couple or three days … then this will be interesting to see if copper is still the ultimate indicator or just another manipulated asset.

  7. echotoall says:

    There is more to this story. Overlay copper’s decline with a ratio of short-to-long dated treasuries. You will see the fed’s ‘twist’ activity (along with the market’s anticipation of it) correlates pretty well between copper’s decline.

  8. Moss says:

    I guess another triple point intra-day move in the DOW will shed some light on this.

  9. mark says:

    Prince Silver, a very important industrial metal and not merely gold’s not so precious little brother, is sending exactly the same signal.

  10. santamonica says:

    Proof that few make 1% off the value of copper (as opposed to the S&P)?….

  11. Patrick Neid says:

    Looking at the monthly chart $1.50 copper cannot be ruled out. In fact it has to be ruled in.

    http://www.mrci.com/pdf/hg.pdf

    While the analogue with the spooz is interesting I’m more curious how much and to what extent are the stories/rumors of copper held in warehouses being used as collateral on real estate loans in China. If the rumors are half true that is a lot of supply that could come to market if they get convinced that the market is more than correcting.

  12. wildebeest says:

    Good article by Greg Merrill. People have got to shake loose this “Dr Copper” nonsense. It is a relic of the days when exchange traded prices gave a good indication of underlying economic demand. But you need to distinguish between demand for the metal, i.e. those who will take physical delivery, and demand for pieces of paper, i.e. speculators and others who have no interest in taking delivery. Speculators are dominating — I recall and article reproduced here maybe a year ago from the GMO analyst James M…(?) that showed this quit clearly.
    These days we have base metal prices and stockpiles rising in unison over most of the last couple of years — when they should be inversely related. Base metal markets are just another casino nowadays.

  13. [...] PDFWe already discussed the worrying collapse in industrial metals, including copper. Doug Kass via Barry Ritholtz provides this chart which shows one of the reasons the move lower in copper is worrying:This [...]

  14. whskyjack says:

    I suspect that the real demand for copper has to be down with the housing crises slowing down the building of new houses. This was around the world not just the US. Maybe what we are seeing is demand poping the speculative bubble.
    BTW remember econ 101 when prices rise substitution occurrs. When I do a rehab now I use half the copper then I did in 2005. I don’t use copper for plumbing I use pex tubing instead.

    Jack

  15. kenny powers says:

    There was a terrible, superficial article in The Economist this week about how still high copper prices bode well for the global economy. Morons. The financialization of copper distorts the price. The Doctor’s medical license has thus been revoked until further notice.

    http://tradersnarrative.wordpress.com/2011/05/05/when-the-tide-goes-out-we-see-whos-swimming-naked/

  16. Patrick Neid says:

    Kenny, thanks for the link. The notional price chart from Der Spiegel article was just what I was looking for.