ChartWatchers

WHAT IS COPPER TELLING US?

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We are rather interested in the manner Copper is trading at present, for Copper has shown itself in recent months to be a leading indicator of the path of the S&P 500. Perhaps this is due to it's economic sensitivity, or perhaps it is due to it's positive correlation with Chinese equities. In any case, the Copper/S&P 500 relationship is important to our trading regime. One cannot help but see that Copper bottomed in late December-2008 before the S&P 500 bottomed in March-2009, which we all know led to a rather material advance until January-2010. At that point, Copper topped out before the S&P 500, and then traded sharply lower - the S&P 500 followed shortly thereafter.

SPX-COPPER 5-1-10

So, it should benefit readers to see that the current Copper decline is rather material, and we're now starting to see the impact of lower Copper prices upon the S&P 500 as it trades lower - with the prospect rather good of still further declines ahead. We're also interested in whether Copper breaks below its 70-day moving average, for it it does - then the S&P should experience weakness through a number of important technical levels such breaking below rising trendline support and very likely below  its 75-day moving average at 1150. In the end, major bull market support at 1085, which is roughly -10% from current levels, and well within the tolerances of a "shake-out" correction before the bull market resumes.

Good luck and good trading,
Richard

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