Saturday, November 16, 2013

Why the Meltdown in Copper Prices this Week is Very Important for Precious Metals, and Equities Markets...

The technical breakdown in Comex copper futures this week is not only an ominous clue for the red metal, but it's also a bearish signal for the entire raw commodity sector. December Comex copper futures prices this week dropped sharply and hit a three-month low. A bearish downside technical "breakout" occurred on the daily chart for the copper futures market, to suggest still more downside price pressure in the near term.

See on the monthly continuation chart for nearby Comex copper futures that prices have been trending lower for nearly three years and are on the verge of a downside breakout below key longer-term chart support at the $3.00 level.

Copper is a critical industrial metal used in construction worldwide. The fact copper prices dropped sharply this week is an early warning signal that construction activity worldwide could be flagging.
Indeed, history also shows copper market price moves can lead similar moves in the U.S. stock indexes. Along with the recent solid price downtrend in Nymex crude oil futures, the copper market meltdown this week suggests the raw commodity sector, in general, remains firmly controlled by the bears.

Importantly, the price action in copper and crude oil recently also corroborates the growing worries of worldwide deflationary price pressures.

Veteran commodity market watchers know that deflation is the archenemy of commodity markets.

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