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What I am about to review for Hi Grade Copper is really a snap shot of many markets at the moment – equities, commodities and some currencies.
Despite the recent wobbles in markets there is every sign we will see a recovery of sorts – even if it comes after another small leg down. I do not expect this next leg down to be too devastating.
But let’s look at what we can glean from copper. First to the chart – a plain vanilla line chart that shows at a glance where copper has been in the last few years:
click to enlarge
We can see that copper range traded for much of 2006-08 – after a rapid rise to fame 2004-2006.
We saw a solid retreat in 2008 but over the last two years we can see that copper took out the old highs and continued on into the blue horizon. One of the few markets to do this.
So where to for copper?
Let’s look at a near term chart with an Elliott overlay:
click to enlarge
We have seen a minor dip over the last few weeks – for all sorts of reasons - which are not so relevant here as we are looking at the technicals. Elliott is projecting a wave five – yet another new high. But as we are at the top of a long run it is likely that this last assault on the summit will be not without its struggles. We can see from the oscillator that the recent retreat was actually quite solid – the oscillator has gone well below zero. But it will sort of get close to the top.
But when we look at a weekly we see even more struggles ahead:
click to enlarge
What we are seeing here is the likelihood of a 50% retracement of the move over the last year. This should not be any surprise after such a run.
Many markets show this pattern. Do not be surprised – or even alarmed. It is the markets just doing its thing.
Enjoy the ride
Tom Scollon
Chief Analyst |