A while back analysts were talking about $2.40 a pound as the “line in the sand” for copper futures. That was the vicinity of copper’s 2007 low and a long way down from the peak of $4.27 a pound in May.
When global economies were riding high on housing demand, appliance and vehicle sales, export demand from China and elsewhere and record prices for crude oil, gains and most other commodities, copper seemed to have its lofty perch pretty well fixed in this bullish crowd. After all, copper is the commodity with a Ph.D. in economics – as copper goes, so goes the economy and the stock market, or vice versa.
Lately and suddenly, however, that direction has been nearly straight down for everything. Copper moved through the $2.40 low as if it were butter and is now making a push for the October low around $1.62 – less than half its price just two months ago. Tuesday’s low was only a few cents above the October low. Will that be the line that holds?
If not, what’s next? As prices of some other commodities have revealed recently, it is no surprise when markets overshoot a target. Copper could drift on down to $1.50, a psychological support area and scene of a small congestion area in 2005. VantagePoint traders should be watching how copper prices respond at this double-bottom area for early clues about the future of copper prices . . . and the economy.
