Despite a relatively rocky correction over the past couple of months Doctor Copper has managed to maintain a bullish price pattern and stay above its Monthly directional line to maintain its “bull market” status-- see top chart below. Copper earned the preface “Doctor” because over the decades it’s a proven a valuable leading indicator for the health of the economy. The logic is that if copper is in an uptrend it’s because there’s global demand for it, and therefore as long as end users of the “working class” metal are willing to pay higher prices for it, then the economy must be growing, as opposed to contracting.
In comparing copper to the S&P 500 stock index above we can see that the two do have a respectable correlation. We can also say that heading into a new month both are in bull markets, and for the health of the global economy, that is a good thing.
Jay Norris is host of Live Market Exercise at www.Clovernest.com and the author of Mastering the Currency Market, McGraw-Hill, 2009.
DISCLAIMER: Futures & Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor!