ChartBrief 98 – China And Copper Crossroads

A few weeks ago I talked about commodities being at a cross roads, and it’s particularly true for this commodity.  Copper has been locked in a fairly tight range after the fast and furious breakout late last year.  The rebound in China’s economy (stimulus and property driven at first) along with lukewarm positioning were the setup.  And now the key catalyst for the move (if you look at the chart below) has also moved into a tight range.  It’s fair to say the next steps for copper are going to be closely linked to what happens in China.  As I noted this week, the outlook in this respect is somewhat murky.

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Taking a bigger picture view, the bear market in Copper that began in 2011 ended in 2016 when the price found a base on the longer term trend line.  So while on a shorter term time frame it may still look to be in a down trend, if this longer term trendline is anything to go by then the longer term view may well be for a renewed uptrend.  Either way the longer term trend line at least provides useful information from a risk management perspective.  If I'm wrong on the view of a slowdown in China's property market in 2018 then copper could well head onwards and upwards.

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Dr Copper has consistently given a second opinion on China macro in line with that of the Chinese PMI.

Taking a longer term view, the 2015/16 bottom forms part of a longer-term up-trendline.

China And Copper Crossroads

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Article by Callum Thomas, Top Down Charts

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Topdown Charts: "chart driven macro insights" Based in Queenstown, New Zealand, Topdown Charts brings you independent research and analysis on global macro themes and trends. Topdown Charts covers multiple economies, markets, and asset classes with a distinct chart-driven focus. We are not bound by technical or fundamental dogma, and instead look to leverage any relevant factor to capture the theme. As such, here you will find some posts that are purely technical strategy, some that just cover economics and data, and some posts that use multiple inputs to tell the story and identify the opportunities. Callum Thomas Head of Research Callum is the founder of Topdown Charts. He previously worked in investment strategy and asset allocation at AMP Capital in the Multi-Asset division. Callum has a passion for global macro investing and has developed strong research and analytical expertise across economies and asset classes. Callum's approach is to utilise a blend of factors to inform the macro view.