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Dr. Copper Predicts A Recession at Trader’s Narrative

Dr. Copper Predicts A Recession

Copper is famously said to have a Ph.D. in economics. So let’s see what Dr. Copper says:
copper futures rate of change predict recession

By now you’re hard pressed to find anyone who won’t be bracing themselves for an economic slowdown. And that is reflected in the historic low of American’s satisfaction levels.

Interestingly enough, when the annual rate of change of copper futures goes into the negative, it signals a recession.

Of course, the National Bureau of Economic Research conveniently labels them after the fact. So we know that officially there was a global slowdown in 1998. And one that lasted from 2001-2003. Notice that this time though the rate of change is much deeper into the red.

Stock market investors and traders who are looking for a bull market may be mollified to know that the market is a forward discounting mechanism. So somewhere between 6-8 months before we are going to see an improvement in the economy, unemployment, real estate, etc. the stock market will shake off the bear market.

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4 Responses to “Dr. Copper Predicts A Recession”  

  1. 1 Michael Lomker

    I’m almost depressed reading your (frequent) posts these days. Bear rallies are a great opportunity to enter short positions. Traders can butter their bread in either direction…

  2. 2 Babak

    Michael, sorry for bumming you out. Step away from the monitor and go frolic with puppies, lol. Are you sure this is just a bear market rally?

  3. 3 diego joachin

    Doc Copper is heading towards its cost of production, 1.3 USD per pound, its 1.85 as i write. i think the bottom of a bear mkt implies a violent decrease in trading volume after watching constant mini rallies inbetween. Any way, our brain is not designed for predicting, so lets manage the risk and make some profit in the middle.

  4. 4 David

    I’m not sure there will be a long term bear market in copper. While now may be a time for short rallies, looking further out, the prospects are for demand to re-establish itself and for the supply constraints to become obvious again.

    With LME 3 month copper falling to $4,100 per metric ton last Friday it seems the market is worried about both current build up of stockpiles and the prospects for metal demand going forward.

    Interestingly however, BHP Billiton says that there may be supply side problems due to a shortage of workers, cost pressures and equipment stress, which means supply may not be able react quickly to demand changes.

    There always seems to be a problem of longish lead times with copper as well as other base metals. So perhaps we will see a surge in copper n the New Year as the market reassesses the demand supply relationship.

    While commodity markets have taken a battering in the last month, the base metals sector could rebound once China and other BRIC countries start to pick up once more.

    Remember China is still the world’s number one consumer and soon their mega infrastructure projects will start to suck in more of the metal, along with a revival in property and automobile markets.

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