Dr Copper

Dr Copper

Copper is called as Dr Copper as it reflects the overall health of global economy. The varied industrial uses of copper means that at any point of time the movement in copper prices can act as an indicator of future movements in the equity markets. This phenomenon can be seen in the accompanying chart where most of the times rise and fall in copper prices precede similar movement in Dow jones. 

Now looking at the copper chart for past one year, we find that it had attained the ascending triangle target of 58.50 to 59 which then acted as strong resistance. Since then copper has fallen rapidly followed by a fall of equal magnitude in global equity markets. There is a strong positive divergence on the chart and in last few sessions volumes on down days have been very low when compared to volumes on up days, this indicate that copper may find strong support at recent lows 50.80-50. For copper to rally from now on it has to break strong resistance at 54.50 above which it can target 55.60-56.

Below 50 copper can easily touch 49 and lower levels which will mean that Dow and SnP will break their recent lows. However a rally above 55.50 will mean a relief rally is on cards in the global equity markets.