Can copper keep above $3.80?

They call it “Doctor Copper” because copper pricing is a pretty good indicator of economic health.  It’s more of a demand metal than gold or silver and hard to fake and there aren’t any silly ETFs stockpiling it although China has socked away a full-year’s supply, which has given copper a very false sense of demand while our masters hoarded the World’s substantial excess capacity at an average of less than $2.50 per pound.  China is up 52% on their investment, not bad considering they’re holding 300,000 tons of it.  

We went short on copper at the $3.90 line in the futures and we took a huge win yesterday so now the question is, will that $3.80 line hold up?  MT reported a 21% DROP in Q3 earnings and said “Steel demand was well below pre-recession levels as the construction and automobile sectors continued to struggle.”  Chief Financial Officer Aditya Mittal said demand in China fell as the country tried to slow its economy.   AK Steel Holding Corp., based in West Chester, Ohio, said on Tuesday that it lost $59.2 million during the third quarter as iron ore prices soared, nearly doubling. AK Steel said the higher ore prices added $76 million to its operating loss.

While these reports are not necessarily dire (we’ll see how the Durable goods numbers look before we run for the fallout shelter) they certainly do raise the kind of red flags that one would think would give global markets pause on the way to 20% gains since July (as I noted in Monday’s Chart Art post) even with the 14% decline in the dollar goosing the results.  Kelly Evens points out in the WSJ that orporate earnings aren’t quite as impressive as the headlines suggest. Much of the overall growth has come from the financial sector, helped by its weak performance a year ago.  

Exclude financials, and year-on-year earnings growth falls below 21%. The average “surprise” margin, by which earnings beat estimates, falls from 9% to 6.5%. Meanwhile, for the fourth quarter, expected earnings growth drops from 32% to just 11% if financials are excluded. Revenues for that period are seen up just 6.3%. 

David Rosenberg points out that we should keep in mind that with the U.S. dollar heading down to 15-year lows, this equity market “rally” in the U.S. has…