Copper has been trading sideways at a historically high level for many months, leading some to conclude that the price has found a ‘new equilibrium’ between $3 and $4 per pound. Prices for copper were rarely above even $1 before China emerged into the world as an economic force and since it has done so, new production has now been in development for some years. This price may not hold for long. Now we see a monthly-scale compression which seems (at this early stage in a new month) to be breaking downward. This is the first chart:
This joins a weekly-scale compression that has also broken down, as shown in the middle chart. There was an earlier example of just such a weekly signal in September last year which merely led to a widening of the range – an occasional consequence of a compression. Now the market has a second chance to start a trend that will end this monotonous range. There has already been a daily-scale signal too, which formed and broke downward in mid-February (last chart). All this seems to indicate that we are seeing the early stages of a downward move that should take copper price significantly lower. Sell short and keep selling rallies.
More on stocks later – there are many new compressions in European indices.