Tag: Copper

Posted on

Inflation is coming

Inflation tops investor concerns according to Fed report

Concerns over higher inflation and tighter monetary policy have become the top concern for market participants, pushing aside the COVID-19 pandemic, the Federal Reserve said on Monday in its latest report on financial stability. ….Roughly 70% of market participants surveyed by the Fed flagged inflation and tighter Fed policy as their top concern over the next 12 to 18 months, ahead of vaccine-resistant COVID-19 variants and a potential Chinese regulatory crackdown. (Investing.com)

The market is no longer buying the Fed’s talk of “transitory” inflation.

Fed’s Bullard expects two rate hikes in 2022

St. Louis Federal Reserve Bank President James Bullard on Monday said he expects the Fed to raise interest rates twice in 2022 after it wraps up its bond-buying taper mid-year, though he said if needed the Fed could speed up that timeline to end the taper in the first quarter. “If inflation is more persistent than we are saying right now, then I think we may have to take a little sooner action in order to keep inflation under control,” Bullard said in an interview on Fox Business Network……Bullard has been among the Fed’s biggest advocates for an earlier end to the Fed’s policy easing, given his worries that inflation may not moderate as quickly or as much as many of his colleagues think it will. (Reuters)

The Fed are reluctant to hike interest rates, to rein in inflationary pressures, as it would kill the recovery.

Producer Price Index

Producer prices (PPI) climbed more than 22% in the 12 months to October 2021, close to the high from 1974 (23.4%). Consumer prices have diverged from PPI in recent years but such a sharp rise in PPI still poses a threat to the economy.

Producer Price Index (PPI) & Consumer Price Index (CPI)

Iron and steel prices, up more than 100% year-on-year (YoY), will inevitably lead to price increases for automobiles and consumer durables. Other notable YoY increases in key inputs are construction materials (+30.6%), industrial chemicals (+47.3%), aluminium (+40.7%), and copper (+34.5%).

Producer Price Index: Commodities

Underlying many of the above price rises is a sharp increase in fuel, related products and power: up 55.7% over the past 12 months.

Producer Price Index: Fuel & Energy

Conclusion

Inflation is coming, while the Fed are reluctant to hike interest rates. Buy Gold, precious metals, commodities, real estate, and stocks with pricing power —  a strong competitive position which enables them to pass on price increases to their customers — if you can find them at reasonable prices. Avoid financial assets like bonds and bank term deposits.

Posted on

The S&P 500 and Plan B

The S&P 500 penetrated its rising trendline, warning of a re-test of support at 3000. But selling pressure on the Trend Index appears to be secondary.

S&P 500

Transport bellwether Fedex retreated below long-term support at 150 on the monthly chart — on fears of a slow-down in international trade. Follow-through below 140 would strengthen the bear signal, offering a target of 100. The bear-trend warns that economic activity is contracting.

Fedex

Brent crude dropped below $60/barrel on fears of a global slow-down. Expect a test of primary support at 50.

Brent Crude

Dow Jones – UBS Commodity Index broke primary support at 76 on the monthly chart, also anticipating a global slow-down.

DJ-UBS Commodity Index

South Korea’s KOSPI Index is a good barometer for global trade. Expect a re-test of primary support at 250.

KOSPI

While Dr Copper, another useful barometer, warns that the patient (the global economy) is in need of medical assistance.

Copper (S1)

The Fed can keep pumping Dollars into financial markets but at some point, the patient is going to stop responding. In which case you had better have a Plan B.

Posted on

S&P 500: Treasuries reflect flight to safety

10-Year Treasury yields plunged below 2.0% on Donald Trump’s announcement of further tariffs (10% on $300bn) on China. The fall reflects rising demand for Treasuries as a safe haven in these turbulent times.

10-Year Treasury Yield

The spread between 10-Year and 3-Month Treasuries recovered above zero. This is a bearish sign: recession normally follows the recovery and not the initial inversion.

10-Year 3-Month Treasury Spread

The S&P 500 retreated below 3000 on Trump’s announcement, strengthening the bearish divergence signal on Twiggs Money Flow which warns of a correction. A test of support at 2750 is likely.

S&P 500

The Russell 2000 ETF (IWM) is expected to test primary support at 145. Small cap stocks have lagged the S&P 500 this year, highlighting risk aversion.

Russell 2000 Small Caps Index

Dow Jones Euro Stoxx 600, reflecting large cap stocks in the European Union, is similarly headed for a test of primary support at 365. Strong bearish divergence on the Trend Index warns of a reversal.

DJ Euro Stoxx 600

Falling commodity prices reflect market concerns for the global economy. A Nymex Light Crude breach of $51/barrel would signal a primary down-trend. Declining peaks on the Trend Index warn of selling pressure.

Nymex Light Crude

The DJ-UBS Commodity Index is similarly headed for a test of support at 75. Breach would signal a primary down-trend. A peak near zero on the Trend Index warns of strong selling pressure.

DJ-UBS Commodity Index

Dr Copper, often used as a barometer of the global economy, has breached primary support at 5800, signaling a decline. Again, a Trend Index peak below zero warns of strong selling pressure.

Copper

Employment stats for July have improved slightly, with Average Hourly Wages growth easing to 3.3% (Total Private).

Average Hourly Wage

And annual payroll growth ticked up to 1.5%

Employment Growth & FFR

But weekly hours worked are declining, warning that real GDP will decline further, after printing 2.3% for the second quarter.

Real GDP & Weekly Hours Worked

I have warned my clients to cut exposure to the market. It’s a good time to be cautious.

“Price is what you pay; value is what you get.”

~ Benjamin Graham

Posted on

China threatened by loss of US trade

The threat of a US-China trade war has rattled investors, with the Shanghai Composite Index breaking primary support at 2700 to signal another decline. Trend Index peaks below zero warn of strong selling pressure. Long-term target is the 2012 to 2014 lows at 2000.

Shanghai Composite Index

Hong Kong’s Hang Seng Index is also under the pump, breaking support at 28,000 to warn of another decline.

Hang Seng Index

Copper prices, a good barometer of the Chinese economy, are also falling. Breach of $6,000 offers a target of $5,500/tonne.

Copper S1

The Yuan has fallen almost 10 percent, testing support at 14.5 US cents. Failure of the PBOC to support the Yuan (by selling some of their $3 trillion of foreign reserves) may cushion the economic impact in the short-term but only invites further escalation from the Trump administration.

Chinese Yuan/USD

There is no easy way out. Trump clearly has the upper hand in trade negotiations.

Posted on

Shanghai breaches support

Copper is testing long-term support at 5400, suggesting weak demand from China. Breach would signal a primary down-trend.

Copper A Grade

The Yuan has enjoyed a respite, consolidating in a narrow line for several weeks. But this is likely to prove temporary, with further advances of the Dollar against the Yuan eroding PBOC foreign exchange reserves.

USDCNY

Shanghai’s Composite Index broke support at 3100, signaling a primary down-trend, but the long tail indicates buying support. Recovery above 3100 would suggest a false signal (or government intervention) while respect of resistance would confirm the down-trend.

Shanghai Composite Index

* Target medium-term: May 2016 low of 2800

Posted on

Dr Copper tests support

Copper is widely considered to be a barometer of the global economy, with prices rising when the outlook improves. Currently A-grade Copper is testing support at 5400. Breach would confirm Chinese selling pressure, offering a target of long-term support at 4500.

A-grade Copper

Posted on

China’s infrastructure boom is over

China has been on a record-breaking infrastructure binge over the last decade, but that era is coming to an end. Fall of the Baltic Dry Index below its 2008 low illustrates the decline of bulk commodity imports like iron ore and coking and thermal coal, important inputs in the construction of new infrastructure and housing.

Baltic Dry Index

High-end commodities like copper held up far better since 2008, but they too are now on the decline.

Copper

With the end of the infrastructure boom, China’s economy may well prove to be a one-trick pony. Transition from a state-directed infrastructure ‘miracle’ to a broad-based consumer society will be a lot more difficult.

Posted on

Gold breaks key support level

A monthly chart of Gold shows the breach of support at $1200/ounce, offering a long-term target of $1000*. Another 13-week Twiggs Momentum peak below zero strengthens the signal. Retracement that respects the new resistance level at $1200 would confirm. Recovery above 1200 is unlikely.

Spot Gold

* Target calculation: 1200 – ( 1400 – 1200 ) = 1000

Crude Oil

Crude is also falling — in response to the rising Dollar as well as expanding supply. The long-term target for Brent crude is $60*.

Brent Crude

* Target calculation: 90 – ( 120 – 90 ) = 60

…And $50/barrel for Nymex Light Crude. Follow-through below $75 would confirm the down-trend.

Nymex Crude

* Target calculation: 80 – ( 110 – 80 ) = 50

Commodities

Copper is below its 2011 low of $6800/tonne, reflecting weak demand from China. Follow-through below $6600 would confirm a primary down-trend.

Copper

Dow Jones UBS Commodity Index has already broken support at 125, suggesting a test of its 2009 low at 100.

Dow Jones UBS Commodity Index

Posted on

Crude and bulk commodities fall but nickel, aluminum rally

Crude oil prices are falling. Nymex Light Crude is testing primary support at $92/barrel and Brent Crude at $99/barrel. Breach of support would signal a down-trend.

Nymex WTI Crude

Commodity prices remain low, in line with sluggish world trade.

But that does not tell the full story.

Bulk commodity prices are falling as Chinese construction slows…

Bulk Commodities

…While copper prices recovered above 7000/tonne. Penetration of the declining trendline suggests that the down-trend is slowing. Breakout above 7400 would strengthen the signal.

Copper

And aluminum alloy…

Alumina

…and nickel show surprising strength, signaling an up-trend.

Nickel

Posted on

Crude and commodities weaken

Crude oil prices are falling. Nymex Light Crude broke support at $98/barrel, signaling a test of primary support at $92/barrel, while Brent Crude is testing primary support at $104. Retreat of 13-week Twiggs Momentum below zero already warns of a Nymex (CL) down-trend.

Nymex WTI Crude

Commodity prices are being dragged down, with Dow Jones-UBS Commodity Index heading for a test of primary support at 122. Reversal of 13-week Twiggs Momentum below zero strengthens the bear signal.

Dow Jones UBS Commodities Index

Copper prices are also testing primary support, reflecting a weak Chinese economy. Breach of $6800/tonne would warn of a primary decline. Follow-through below $6400/tonne would confirm.

Copper

Powered by WordPress / WordPress Maintenance By WPSmart