Copper is often a useful guide as to the future fortunes of many of our miners – NHP, RIO, FMG and others. It is also a barometer for the economic play in China, Chindia and other emerging economic blocs.
Copper has a voice of its own in that it reflects more what is happening in domestic China as opposed to what demand may come from the USA for China’s local production for world export demand.
Thus copper is not entirely USA or double dip recession related. Although should there be a double dip then some impact may be felt on copper exports – but not the whole impact.
All of the above can be captured in a single chart – as below - the beauty of charts:
click to enlarge
But we can also make some additional observations. Firstly we can see that in the massive run up post Iraq invasion in 2003 this was from a very low base and an extended period of relatively low flat prices. Such a sudden run up does provide some concern in that a correction should ordinarily occur. Well we did see one in late 2008 but this was followed by an even steeper run up!
One can say there has been no real consolidation of note. In my conservative approach to long term ‘sleep well at night’ investing I still hanker for a correction.
The other point of note is that we have seen multiple failures around the sub $4 level. The projected wave five high – first wave five – is around the $4 level.
And anything could happen between now and then to cause yet another failure. But we cannot expect much more that the above protection from Elliott at this point. The rest we will have to wait and see when we get just a little closer.
Enjoy the ride