The fall in the red metal has completely erased the gains made on Monday and Tuesday of this week as well as those made late last week when it bounced away from the psychological $3.00 mark.
It is threatening to sink below that once more. The meddle of the bulls is going to be severely tested here. If copper falls below the lows made last week and CLOSES below $3.00, I think we all had better pay attention as that would be a horrendous signal that the fall in stocks could become even more serious than it already is.
Dr. Copper would be signaling a sharper contraction in the overall global economy and would bring into serious challenge the idea of "buy the dip" in stocks which has been the featured sentiment for longer than I can remember now. If the equity market sentiment shifts towards one of "sell the rally", look out!
Speaking of equities, let me post up a quick chart of the Russell 2000 index. That is about as broad a basket of stocks as you can get. Two things to note. First - the highs near 1213 are now confirmed as a Double Top on the chart. The reason? Because support zone down near 1080-1075 has failed to hold. Bulls still have a chance to end the week back above that level in the last two trading days but the current negative sentiment seems quite strong for now.
Secondly - the market has officially entered "CORRECTION" territory - which is defined as a move of 10% + off the peak high. Notice however that for the market to be declared officially a "BEAR", it would have to fall to near the 975 level and collapse through that level, preferably on strong volume.
Thus, even though the selloff is incredibly violent at the moment, the market is undergoing a correction and has not yet, from a technical analysis standpoint, entered become a Bear. In other words, the Bull is wounded but not dead yet.
Take a look at the S&P 500. It is quite different from the Russell. The index is flirting ever so dangerously with entering "CORRECTION" territory in today's session.
Note how far down below the current price level it would have to drop to turn the BULL into a Bear. Stay tuned... as usual, time will make things clear for us but for now, the Bears have the upper hand but the Market is moving to levels that might shake the bulls out of their stupor.
What is also rather interesting on a day like this is that while the Dollar has been getting shellacked, on the chart, it is still just bouncing up and down like a ping pong ball going nowhere. It is still stuck in a range between 87 on the top and 85 on the bottom. It did violate the bottom of the range early in the session but has rebounded and move back within the "box".
Cattle are all over the place today. First they sold off quite sharply across the Board. Then the two front months began to move up and turned positive. Then the sellers came back in again and back down they went. The big fund long contingent in this market is fighting for dear life NOT to be flushed. Right now it looks as if they are losing the battle but the close is about 20 minutes off so anything is possible. It is amazing watching the amount of money some players will spend in an attempt to defend a position.
Gold thus far has been able to shrug off the selling pressure coming in from those selling it to cover losses in stocks but is having some difficulty getting through the $1250 level. Silver is being drug lower by copper but getting some buying related to gold's good showing. I fear that if copper cracks $3.00 decisively, silver is going to fall.
With the current equity weakness, unless we get some dose of economic data that is surprisingly strong ( say a jobs number ) instead of the surprisingly weak data we have been getting, gold is drawing support from ideas that any notion of the Fed raising interest rates soon is effectively DOA for the time being.
What a day... I am already ready for Friday afternoon and it is only Wednesday!