"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

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Friday, February 28, 2014

Copper Continues to Fall as Stocks Continue to Soar

Very strange doings occurring in Doctor Copper when one considers the nearly unstoppable surge higher across the US equity markets. One does not generally see copper parting ways with the broader stock market for long as this key bellwether commodity has an excellent track record at predicting ( or at least confirming ) economic strength, not only domestically these days, but globally, especially in regards to China's economy.

Take a look at the following copper chart and notice the sharp drop on the daily chart. Some of today's gap can be attributed to the fact that the March contract has given way to the May as the most active and that is now being plotted on the continuous contract chart; nonetheless, the technicals remain extremely poor for copper - remarkably so given the euphoria around US equities.

Two things stand out - first, copper is trading BELOW both its 50 day and its 200 day moving averages. That is bearish. Secondly - it is sitting right on top of a series of support zones. It tested the first of these today and managed to stay above that zone, but just barely.

Also notice that the Directional Movement Indicator shows the bears currently in control of this market. Negative Directional Movement Indicator ( Red Line ) remains ABOVE the Positive Directional Movement Indicator ( Blue Line ). Also, the ADX is beginning to undergo a slight upturn. It has not managed to climb above the 25 level, much less the 20 level, but it is rising as the market is moving lower indicating the POSSIBILITY of a trending move lower.

If copper were to break chart support indicated above in conjunction with a rising ADX line, it would tend to bode poorly for the overall commodity sector in general, especially those commodities which tend to be good proxies for overall economic activity such as cotton.

Cotton's chart looks decent for now but if it were to drop below 84 simultaneously with an additional move lower in copper, it would not bode well for commodities in general. Obviously there are going to be exceptions to this depending on the specific demand/supply scenario for each commodity market but I am speaking of the sector in general.

I find it particularly disconcerting to see copper moving lower, even as the US Dollar weakens. That has not been a frequent occurrence.

I will try to get some more up on gold later as time permits along with some analysis of the COT data. this has been a busy week in these markets with lots of strange, wild moves occurring and violent whipsaws at times ( the grains come to mind today). I for one am glad to see February come and go and look forward to March trading. While one has to respect the chart action if they are trading, I personally never feel comfortable putting large positions on in any market unless I can understand what is moving it. Some guys like to buy without asking questions based on the technical pattern ( I will too to a certain extent ) but only the brave ( or reckless ) will pile into a market without knowing what in the world is moving it. Reversals in such market come with little to no notice whatsoever and can punish you severely for being so brash and foolish.


  1. The copper's price falling down means nothing because it's just the paper price. The price of physical copper is trading at premiums on the Ulan Bator's and Chisinaus markets. People in Mongolia and Moldova are buying physical copper in enormous quantities with both hands ...

    1. they prefer to call themselves bronze bugs

    2. He, he! The bronze bugs are funny.

  2. Abrazas I think the huge demand from physical copper comes from the massive housing recovery going on in the USA, it's just down 'cause the weather but wait another month everything its gonna be great, I think we buy WHR, GE, HD. And go to bed. Haha... Oh wait rumor has it that king hussein Obama is going to re build America with the money he got from the BAB, yeah thats it. It's all good in utopia

    1. Anon, you pegged us partially wrong. I do not believe in the phony recovery, nor do I believe that printing money like there's no tomorrow is working, or that it could ever work. It will bring us, and our children, pain and suffering only. Not a believer of the S&P to infinity doctrine either. I am long gold and silver, as a long-term insurance against this insanity. On the other hand, I am literally sick of all this nonsense spewed by a dozen or so 40-year veterans with their fantastic stories and even more fantastic and bombastic predictions, which have never, nor could ever transpire. I think they muddy the water and are as clueless as the rest of us, but it's their job to make the calls on future developments, so by Jove they do. One can either choose to listen them, or ignore and make fun of them.
      I get your frustration with the country's leadership, and think that Obama is just a cherry on the top, after a parade of bad presidents going back to (at least) pre-Nixon era. There was not one since then that is deserving of the title. Not that they are really running the country anyway.
      We are not as much opposed in our thinking as you think.

    2. I hear you my friend but I tell you it works the other way around as well, you get pumps every where in every asset class the way I see it I pick a view and stick to it I listen to every one but market timers you make fun of Eric king people, but what about market watch people! To me is all about good research and good technical analytics the problem in these shit markets is that there aren't many options out there so it becomes follow the fed the fed is your friend and all kinds of bull shit that at the end never end well. The punch that puts you down is the one that you don't see coming ie 2001 2008 crashes. Where I am going is that I wish we would add value here you may be right or not but it would be great we all l earn from good posts discussing ways to make money and not end up like a bunch of idiots posting for the heck of it, and I include my self lately. You can post a joke bit when the joke gets old then you move on. I like to make money, and use dan as another tool, I think Hubert adds value, wolf, and so on. We need ideas. This is not a dick contest. Specially because we don't share the timing of the trades. Perhaps we should, why not? . I am just making a call to make this a better blog that's all. Dan does a great job we should each try and add value. For example I follow mux quite a lot, you may like uranium one, others may like first quantum, or trading comex gold or sugar . If we are consistent this could become a hell of a blog.

    3. Fair enough. I am of the opinion that this is already a hell of a blog, not because of bunch of us posting sh*t, but because of Dan's experience, eloquence and integrity. The rest I can choose to read or to skip, depending on the poster and/or the subject.
      Your idea of a perfect blog is where everyone sticks tightly to the subject and (in your opinion) provides valuable information. But who's to decide what is valuable information and what is rubbish? There are a few people that post here (obviously me included) that annoy you and you wish they'd shut up, but look around and find me one site on this wide web that fit your picture of a perfect site where everyone is smart, eloquent and useful.
      My practical suggestion to you is to screen. As soon as you see my or Mark's name (or anyone else's who bugs you) just skip it until you get to someone who you don't mind listening. Sometimes I just read Dan's commentary on the market and skip the entire discussion. Normally, I like reading the rest of the posts and there's often something to learn or to lough about. Good luck with your trades!



  3. The "Resilient Consumer" scores again, as now he will benefit by dirt cheap prices when he needs to get his McMansion re-piped.

    Seems to be a "rolling crash" in these commodity markets which always favors the consumer spender. If one commodity like coffee gets out of hand on a bear market rally, well there's always another item that gets its priced crushed.

    And even on days when the USDX gets crushed, it doesn't matter.

    GLD is rolling over again in every currency:


    Whereas the retail stocks continue to soar in all currencies, regardless of what's happening in Ukraine, unemployment, China crash, etc.


    1. http://www.zerohedge.com/news/2014-02-28/fortress-loses-millions-bitcoin-investment

  4. Buy gold and silver, China hoarding gold, yuan new reserve currency, dollar collapse, 2008 was just a picnic, hyperinflation....yada yada. Haven't heard one of these in awhile but talk about same old:


    1. Couldn't agree more. Great article because falling copper is a sign of global growth slowing. I prefer gold because it is a monetary metal rather than an industrial metal. I think most industrial metals will fall in the event of an economic slow down. Central banks continue to buy gold. I think the big news will be whether or not India lifts the gold tariffs.

    2. Oh and forgot to mention his final pitch is call Mike Maloney at Goldsilver.com, figures.
      You can talk to his customer service reps so they can "fill you in" on how it all works. These are exactly the types Armstrong talks about.

  5. And another benifit of Dan's blog.
    I am still interested in FCX as an investment despite their re entry into the oil market. However it's not going to happen until Copper bottoms.

    Dans analysis tells me to keep on waiting.

  6. Dan,

    Copper may be closer to a bottom than most expect, but I wouldn't rush it. Watching copper and my currency diffusion index. Dollar could press lower for a few more weeks. Copper analysis will be posted Monday. Watch copper's position in the COT table. The higher it goes, the greater the energy stored for a rally

    Russia political moves could finish gold's counter trend move by April/May. This will be confirmed by lower currency DI.

    Have a good one!

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