Copper has just met the lower resistance line of its descending triangle pattern and should it break through that resistance the price for copper could fall like a stone. That, in turn, would have a MAJOR “watch out below” impact on the future level of the S&P 500. Let me explain.
Historically, copper has been a barometer of economic growth exhibiting a high positive correlation with the performance of the S&P 500. 6 months ago (the end of August, 2013) the two categories began diverging from each other – not just a little bit – but dramatically – and continue to do so (the S&P 500 is UP 13%; copper is DOWN 11%). That suggests that there is less demand and that growth is slowing down.
When copper performs well it indicates increases in cyclical growth or, at the very least, expectations for growth. The 36% decline in the price of copper since July 2011 suggests there is an ongoing demand for less copper and that, as such, growth has been, and continues, to slow down. This, in and of itself, strongly suggests coming lower levels in the value of the S&P 500.
The decline in the price of copper has taken the form of a descending triangle and as of yesterday it was at a crucial point within said triangle, right at the lower line of resistance. Triangles predict that once support is taken out (in the current instance once the price drops below resistance at $2.95) the extent of the future decline is determined by the extent of the initial decline which was 33% (between July 2011 & October 2011). That would suggest a further decline of 33% in the price of copper! That’s bad enough – terrible actually – but the implications for the future level of the S&P are alarming to say the least.
Perhaps, after all, there is something valid in all the negative prognostications for the future of the S&P 500 that we have been reading about lately. (See the following links for details.)
- Warning! Really! There IS Danger Ahead for the Markets! Here’s Why
- We’re on the Precipice of a 50% Drop in the U. S. Stock Market! Here’s Why
- Stock Market Will Collapse In May Followed By Major Spike in Gold & Silver Prices! Here’s Why
- Dr. Nu Yu: “Stock Market Alert! S&P 500 Could Correct to 1640! Here’s Why”
- 4 Clues That a Stock Market Collapse Is Coming
- End of “Wall Street Party” Will Be a Catastrophe! Here’s Why
- Stock Market Bubble Going to Burst & Unleash Destructive Forces on Global Economy
- These Indicators Suggest Stock Market Returns Are “Too Good To Be True”
- Bookmark This Article: The Stock Market Will Crash Within 6 Months!
- These 2 Stock Market Metrics Make Me Feel Uneasy – What About You?
- 4 Clues That a Stock Market Collapse Is Coming
Furthermore, it might just substantiate that all the rose-coloured forecasts for the markets (see the following links for details) are nothing more than hype and cheerleading by those in the business of keeping us in the game and separating us from our recent gains.
- This Chart of the Dow Suggests “Bring on 2014 – We Ain’t Seen Nothin’ Yet!”
- Relax! Take Stock Market Bubble Warnings With a Grain of Salt – Here’s Why
- Stock Market Bubble & Coming Recession? These Charts Say Otherwise
- The Stock Market: There’s NOTHING to Be Bearish About – Take a Look
- Pop a Pill & Relax ! There’s NO Immediate Danger Threatening Stocks
- Latest Action Suggests Stock Market Beginning a New Long-term Bull Market – Here’s Why
- Sorry Bears – The Facts Show That the U.S. Recovery Is Legit – Here’s Why
- Correlation of Margin Debt to GDP Suggests Stock Market Has More Room to Run
- Stocks Should Have a Record-Breaking Year According to These 7 Bullish Fundamentals
- Don’t Be Scared “Stockless”! There’s No Fear Anymore – Anywhere!
So far (check out the price in the table in the right hand column) support is still in place – just barely. I will watch the situation closely and send out an “ALERT” or “ALL CLEAR” as things unfold.
Copper is one of the most widely used metals on the planet, and has been for more than 10,000 years. Today, it’s the nervous system of our society – of our cities, homes, tools and toys. The simple truth is that the western lifestyle is completely dependent on copper. Here’s why as depicted in the infographic below.
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