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Dr Copper shows the way for stocks

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High grade Copper (AKA Dr Copper - because it has a PHD in Economics...) often preempts stock indices moves (alas not always, not crucially in 2011 but that has as much to do with central bank interventions as anything else).

 

The 4 hour chart seems to be showing a Flag break to the upside (TBC) but if this does break and then breaks the near term resistance levels then stocks may not be far behind...

Always worth checking this out even if you don't trade it.

Thoughts as ever keenly sought

HG-4-hours021018.thumb.png.55d2059b64d16c576ef2cf4a40dfeea4.png 

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@Mercury, it is possible that Copper could continue its downwards path. That is not out of the question. An interesting one and I for one cannot even attempt to call whether Copper will break to the upside or continue its downward trend.

 

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Agreed @TrendFollower and nor am I.  What I was suggesting is that the buoyancy on copper is often an indicate for stocks to follow, and similarly in reverse.  So only need to watch it not call it.

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@Mercury, yes I understand. Have a look at my past Dr Copper articles from a year or so ago on IG Community. 

Also there are years when stocks simply do not follow Copper so it is not always the case. Though I accept it has happened more years than not over the past 10-20 years. However, there have been years in that period when it has not happened. 

What we do not know is whether it is one of those periods now when it does not happen?

 

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A brief update on what HGC is doing.  Basically it is in consolidation (Flag formation) since the recent relief rally phase.  The breakout of this flag will determine the next phase but I believe it will be a second stage rally to complete an overall retrace move that will then turn a drop heavily.  I am currently anticipating this to align to stock indices movements and any top out on HGC to be indicative of Stocks top out (or retrace turn, depending on the eventual resolution to stocks).  If the Flag is valid it suggest a top out of the retrace rally in the 31,000-31,500 area (around about the Fib 76/78% area.  This could suggest a strong Stocks rally phase coming up.

HG-Daily_261018.thumb.png.27cc1768faaa8942018cd089a477bb90.png

 

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@Mercury, I do like and appreciate how you combine charts and explanations to support your charts in your posts. I understand that it requires time and effort along with knowledge and experience of course. 

It will be interesting to see if there is a strong 'equities' rally phase coming up. To offer a balanced view on this one needs to understand the Copper prices have dropped around 17% from June 2018 highs. As you will appreciate, a strong US dollar, will hurt Copper prices as they become far too expensive for other countries around the world to purchase them. 

Just like the stock market is a future discounting mechanism say around six months into the future in relation to share prices, Copper prices reflect something similar for the world economy. To me lower or declining Copper prices could reflect negative sentiment for the world economies.

One must also appreciate that Copper is heading for its first yearly decline in prices since 2015. There are plenty of economic concerns around the world at the moment. The US imposed tariffs have not helped. It is stated that Copper has predictive powers and reported that investors are not very optimistic about the outlook for equities.

I personally will let the price action of Copper tell me the 'story' and it will tell us all a story. 

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HGC remains in a Flag consolidation formation after a fake breakout down was pushed back inside the Flag (very bullish in this case).  We could see another fall towards NFP tomorrow and if we see a rally on up and through the upper line this will, I think, support a stocks rally and USD fall.

HG-4-hours_011118.thumb.png.5fc146ddb9135043e36296f948b0c066.png

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Just to update on the above, the market has indeed regained the upper Flag line and broken through, remains to be seen if this is confirmed with a close on the daily candle above but the force of the move is significant and after the bullish fake break below it bodes well for an ongoing rally, which can be a precursor to a stocks rally.  On the Daily I am looking at a retrace termination at Fib 62% or 76/8%, which could come just before a termination of Stocks rally, one to watch.

HG-1-hour_021118A.thumb.png.1bdc09e9a88cfa17389b86a9b481fa8a.pngHG-Daily_021118.thumb.png.9c7d88e87bcc070fff702f1fe47cf3cc.png

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Copper still stuck in a consolidation Flag.  Could a bounce off the bottom signal a retrace and rally in stocks?

Could be interesting to watch how Copper goes if US stocks do go into retrenchment...

HG-Daily_081118.thumb.png.71bb44225860629536c68792af6f4e97.png

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Been a while since I looked at Copper.  The consolidation I was looking at back in November 2018 didn't spark a rally until there was a fresh lower low but since then the rally I was looking for has occurred and interestingly it has done so in a rising triangle formation that is consistent with a Pennant.  Last week we saw a strong bounce off the lower line, which makes me thing another high is on the cards and the trajectory of this looks set to hit the Fib 62% zone in May.  Long term there are 2 main scenarios of which I prefer the second, which is a deflationary collapse of prices back to the floor.  In the meantime the interim roam map targets are:

  1. a hit and turn bearish from the Fib 62% zone around 30,000.
  2. a breakout of the Pennant
  3. A break through (or rally from for scenario 1) the 22-23,000 zone around the long term supporting trend-line, after which we should know which scenario is in play. 

Whatever way the end stage scenarios play out a rally to my first interim target and turn into a bearish phase is indicative for stocks following suit.  One to monitor is not to trade.

HG-Weekly_040519.thumb.png.8fdd81225e17b38f84b7eddabc71c34a.pngHG-Daily_040519.thumb.png.e0833470c1971e65e8f293d2be0393e5.pngHG-Monthly_040519.thumb.png.715181e69e6c10687021dc27ebee586f.png

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Not a triangle but possible a parallel channel with a turn today off the Fib 62%.  A run up now in concert with stocks will leave me tracking to see if major turns occur when Copper reaches it's next Resistance point at circa 30,000.

HG-Daily_150519.thumb.png.74638acc9d0acb2599307b5024e8efc2.png

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Copper has continued to descend.  Yesterday it bounced with a descent spike and came back inside another possible lower trend (Flag) line, still unconfirmed though.  On the Daily chart the spike bounced just short of the Fib 76% on PMD and although another leg down to the bottom of that support zone is clearly possible a rally from here would in theory be bullish for stocks, in fact if this did happen and price then once again moved back inside the lower Flag line it would be even more bullish.

In addition the non commercials COT data is net -22k as at last Tuesday.  The non comms have got this market spectacularly and consistently wrong at major turns (naturally enough as the insiders are the miners and refiners - i.e. the Commercials).  A -22k level is a strong case for a rally of a temporary nature, such as another leg up inside a Flag. 

One to watch as next week progresses.

HG-Weekly_250519.thumb.png.4db9963dd3cc45afad963e6bfd0387ae.pngHG-Daily_250519.thumb.png.9accddf683025a4f2026b7717e2cba3a.png 

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