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Quiet Market? Think Again . . . Copper is Melting Down!!

Posted by Larry Doyle on February 3, 2010 3:16 PM |

Just a quiet Wednesday in the markets?

Let’s see . . . major equity averages are flat to down .5% on the day, bonds have backed up 5 basis points but remain within the range, the dollar is doing a little better but not making a major move. Might be a good day to catch the early train home because nothing is going on? Not so fast . . . let’s look a little deeper because I think there is a major move afoot in a certain market segment. What would that be?

Commodities in general. Copper specifically.

I continue to believe our equity markets will take direction from:

>> China
>> commodities
>> interest rates, primarily mortgage rates.

While most market segments today are marking time, commodities as measured by the DJ-UBS Commodity Index are down 1.4%. (Look at the graph found in the provided link. Looks mighty bearish to me.)

Copper specifically is down almost 4% on the day. Why is copper melting down (no pun intended)?

Reuters reports, U.S. Copper Drops $3/lb on Economic Recovery Fears:

NEW YORK, Feb 3 (Reuters) – U.S. copper futures fell more
than 2 percent and neared the $3.00 per lb level Wednesday
morning, as mixed economic data and lingering concerns about
tighter Chinese monetary policy continued to counter recovery

* Benchmark copper for March delivery HGH0 dropped 7.15
cents, or 2.3 percent, to $3.0180 per lb by 10:46 a.m. EST

* Range $3.0155 to $3.1440.

We took out the bottom end of that range.

* Copper weighed down by currency-related selling pressure
after data showed smaller-than-forecast drop in U.S.
private-sector employment in January.

* Copper losses accelerated after data showed
less-than-expected rate of growth in U.S. services sector.

* Copper sentiment slammed by Chinese government clampdown
on bank credit.

* India’s copper demand likely to grow by at least 7
percent in financial year 2010/11 on strong power
infrastructure sector.

This last bit of news from India would be a net plus, but overall I see a lot of warning signs in this color and it is being reflected in the price action within the copper market today.

Copper is now down almost 15% from its highs seen in early January.

Quiet day? Don’t think so.¬†Navigate accordingly.


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