by Michael Tarsala, CMT
Copper prices continue to move sideways — one sign that the U.S. economy is hanging in there, and is not on the precipice of collapse.
There is no substitute for copper, and it’s one of the most widely used industrial metals. If you want to build a house, you need copper pipes and copper wiring. It’s needed for industrial buildings, infrastructure and telecom projects, and finds its way into all sorts of electronics.
It’s such a good measure of overall industrial production that some call it “Dr. Copper” — the metal that has a Ph.D in economics.
What the good doctor is telling us right now is that the global economy is challenged, and a direction change could happen.
But for now, it’s hanging in there.
Source: Stockcharts.com
The chart above shows that copper prices continue to trend lower from July last year.
Yet for the time being, copper continues to hold a longer-term trendline going back to October 1999. A breakdown of that upward-sloping trendline at the bottom of the chart could send a powerful economic signal. So far, though, the trendline is still intact.
The moving averages also are worth watching. Back in May 2010, the shorter-term 50-day moving average in blue crossed above the 200-day in red. It helped to signal a meaningful trend change to the upside.
A breakdown of the 50-day back below the 200 -day avearge could also be a negative signal for copper — and therefore the economy. So far, though, it hasn’t happened.
It’s worth checking in with Dr. Copper on a regular basis in the coming weeks and months. So far, though, it looks as though the Dr.’s patient is still doing OK, all things considered.
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