Commodities Euphoria Gets Hit by a Stun Gun

One of the bigger themes this year has been the belief that a global pick-up in growth is underway. The USA/China tariff tennis slowed growth in commodities worldwide. The industrial metals index topped out in January 2018 as the tariffs roiled the markets. Copper has been in a slow decline, as an example, but we could add steel, lithium and rare earth metals as other examples.

I was on The Final Bar with David Keller this past week, where I pointed out that the Baltic Dry Index was falling. That does not usually bode well for $COPPER and other industrial metals.

Here is the chart I used, which had not broken the 4-year uptrend as of Tuesday evening. Now, however, it has, which suggests copper could pull back even more here, despite the fact that it is just starting a move down.

It's an important dynamic to watch to see if the global growth story can continue. Unfortunately, commodities do a good job of representing that, and they seem to be breaking down fast and hard since the phase one trade agreement was signed. Perhaps it is a whipsaw lower, but it is definitely concerning.

If we are counting on global growth improving, these charts have to start moving meaningfully higher. The false breakout on $COPPER suggests more pain ahead. Stay tuned and stay cautious.