Given the general lack of direction in equity markets over the past week or so, I have spent a great deal of time looking at some longer term charts. One that gave me a significant cause for concern was that of copper. The reason that I find this chart more intriguing than most is that copper is often a leading indicator for equity markets due to its industrial usage. The chart dates back to 2008 and shows the formation of a multi-year head and shoulders pattern, the $320-325 region looks crucial. If we were to break this level on a convincing basis to validate the pattern, the theoretical target price would be around $145. To put this into context the last time we saw this level, marked lows in the equity markets seen in early 2009. Mr Bernanke and the Fed will no doubt have an eye on copper going into the next big meeting in September at which we should be given a clearer picture of any fresh stimulus.

 

Posted by Philip Ball | Sales and Trading