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.

Good trading,
Greg Schnell, CMT, MFTA
Senior Technical Analyst,
Author, Stock Charts For Dummies

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Greg Schnell
About the author: , CMT, is a Senior Technical Analyst at specializing in intermarket and commodities analysis. He is also the co-author of Stock Charts For Dummies (Wiley, 2018). Based in Calgary, Greg is a board member of the Canadian Society of Technical Analysts (CSTA) and the chairman of the CSTA Calgary chapter. He is an active member of both the CMT Association and the International Federation of Technical Analysts (IFTA). Learn More
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