- New Science in old markets -

Copper and mining shares extend, $ and bond update

Happy New Year to all.

The S&P metals and mining ETF has been extending for the last few sessions, as various metals squeeze higher and now the copper price has done the same:

Mining ind & cop top exts

It is worth remarking that Copper is very expensive compared to the levels that prevailed for many decades before China emerged as a major industrial consumer. This consequent expansion of demand has led to a large expansion of supply too but prices have maintained their high levels instead of falling back toward some equilibrium that would (we guess) be up to about a third lower than hereabouts  - about $2.00 -$2.50, say. This resilience is probably due to the several long-running strikes that have held back supply and so concealed the true increase in the world's copper production capacity. These will doubtless be settled at some point and the quick increase in supply that will result will then cause a major slide. In the meantime, there is some resistance just about here from an old weekly-scale compression (ringed below), but this is really too old to have much force behind it:

Copper weekly old comp

Still, these daily-scale top extensions in the ETF and copper should be taken seriously and we would look for a place to sell (again). The usual health warning applies - top extensions mark the end of current up-moves but not necessarily the start of a subsequent down-move. There may need to be some churning before the next direction become clear - see our remarks to this effect on Bitcoin in the 12th December edition.

Elsewhere, the $ index eventually broke down and US bond yields broke up from the compressions mentioned in the December 19th edition and bounces in both should be sold - an upward break in bond yields is equivalent to a downward break in bond prices. If no bounces occur soon, there may yet be a bigger bounce that takes prices back to the level of those compressions, as often happens. That is usually the best opportunity to take a trade in the direction of a break, as often mentioned here.

An update:

Ten yr not rates & $ index comp update

All signals courtesy of software supplied by our friends at Parallax Financial Research www.pfr.com