Yesterday, most stocks and commodities took off and rallied to the upside. The iPath Dow Jones-UBS Copper Subindex Total Return ETN (NYSEARCA:JJC) opened sharply higher and actually closed above the important daily chart 50 moving average. This is generally viewed as a sign of strength by most seasoned traders. Copper has been viewed as a leading economic indicator by investors over the past 100 years. When the industrial metal rallies it usually signals strength in the market and economic expansion. The opposite is true is when copper declines, it is usually viewed as an indication of a weak and contracting economy.
Today, the JJC is giving back all of yesterday’s gains and this has to be viewed as a bearish indicator. This afternoon, the JJC is trading lower by $1.32 to $43.99 a share. Today’s decline puts the JJC back below the daily chart 50 moving average and in a weak technical position. It is safe to say that copper lead the markets lower in 2011 and it could certainly indicate weakness for 2012. Traders can watch for intra-day support on the JJC around the $43.60, and $43.30 levels. The daily chart will have some minor support around the $41.00 level in the near term.
Some leading stocks that could be affected by weak copper prices include Freeport McMoRan Copper & Gold Inc (NYSE:FCX), and Southern Copper Corp (NYSE:SCCO). These stocks are holding up well today and are not following the decline in the metal. It is important to note that if copper continues to decline further these stocks will likely follow the same type of downward path.
Nicholas Santiago
InTheMoneyStocks.com
