In the first of two editions on April 19th, we remarked that we expected Copper prices to fall back toward the bottom end of their large range (around $2) at some point in the future, as new supply arrives in the market - there is a long lag between high metal prices and new production. There have now been new signals that might make that view more urgent.
The price of Copper has been in a shallow down trend for the last few months, characterised by a series of daily-scale compressions that have marked each step downward. Now there is another such signal:
In truth, the trend has been so slight that this is more like a trading range. There has also just been a weekly-scale compression, as we expect toward the end of trading ranges. This one has yet to break:
The monthly-scale chart shows an old but crucial compression that dates back to September 2014. This has acted in the usual way to first 'attract' the price and then act as a barrier to it - this 'strange attractor' aspect of compressions is covered in our full user guide which has just been updated (as has the summary guide).
This means that we have a slight bias to the downside here, which is unusual when faced with a compression signal - they usually mean that the market is finely balanced. The arrival of that new supply from mines and refineries commissioned years ago is one reason; resistance offered by that old monthly compression is another and the worrisome downturn in Europe's money supply (arguing for a recession a few months from now) is a third. There is some evidence of a slowdown coming in China too, although there is no reliable way for us to predict that.
All this means that we are poised to act, if the current daily-scale compression breaks downward. If you are very bold, sell now, betting that this other evidence points to the eventual break being downward. We usually wait for the break, but might take a small initial short here and then add once the break actually happens.
All signals courtesy of software supplied by our friends at Parallax Financial Research www.pfr.com