The active month, copper-futures contract on the COMEX has been trending sideways since April 2013. Throughout this period, the crowd has anchored to chart support at 3.0510, based on the low in 2011 and the lows around the same mark in 2010. The market has been churning around this floor for nearly nine weeks. However, a bearish momentum signal that could be confirmed by the end of this week would place odds on a break lower.

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The indicator at the bottom of the chart above shows a fast and slow average (fast = blue and orange = slow) of the 14-week relative-strength index. A sell signal will be generated this week unless the market recovers substantially by Friday. Specifically, note this pattern:

  •  The orange line is declining (long-term momentum is weakening in a falling trend);
  • After a consolidation in price over the past two months, the blue line recovered to test the orange line (short-term momentum strengthened as the sellers took a breather);
  • The blue line is poised to turn back down this week (short-term momentum is about to weaken again).

If the churning of the past two months resolves down, it would increase the odds of follow-through selling beneath technical support at 3.0510. Couple this with bullish long-term prospects for the dollar, and the outlook for copper is bleak.

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