In looking over the recent Commitment of Traders report, one can observe the steady migration of the hedge fund community from off of the short side of the market to the long side. That change in sentiment is reflected on the copper price chart. The red metal has rallied some $0.30 pound in two months.
It would appear that traders are keying off improving economic data here in the US ( today is was new home sales which rose 6.4% in April from March). There also is optimism that Chinese manufacturing might be stronger than originally anticipated. The last factor is shrinking inventory levels in the LME warehouses. Today, the amount of copper in storage there fell to the lowest level since September 2008.
These three factors were enough to prompt some remaining shorts to head for the exits as well as to entice some new buyers. Here is the takeaway however as far as I am concerned.
Copper is one of the best economic indicator around. ( I think crude oil is the other). As such I believe it tells us a great deal about what investors are thinking in regards to the prospects of the overall global economy. A rising copper price should therefore not be ignored, any more than a falling copper price should. When one combines that with the fact that crude oil prices remain stubbornly above the $100 level, in spite of the large amount of shale oil being produced here in the US, it should at least make one hesitant to become too pessimistic about the health of the economy moving forward.
Copper has managed to move into a resistance zone on the price chart. That big sharp drop lower in price that occurred back in March this year is still dominant on the price chart however. I would like to see this market clear the top of that drop zone to feel that copper is sending a firmer " All Clear Ahead" signal. We will watch this closely, along with crude oil
"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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