Dr. Copper: Prognosis Negative

Dr. Copper, aptly named for the metal's ability to gauge the strength of the global economy, is not giving the most upbeat prognosis at the moment. In fact, with today's weakness the intermediate term trendline is being tested. A decisive breach of this important trendline would likely lead to a testing of the low made last June and would probably be accompanied by rising concerns of deflation and slow global growth.

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And unfortunately, the Point & Figure chart of copper doesn't look too promising either.

We wish we could say that trader positioning and sentiment were at negative extremes (portending some sort of rally), but that isn't the case either. In the first chart below we show the commitments of traders in copper futures. Both the commercial traders (smart money) and large speculators (not so smart money) are showing neutral positioning (no extreme net long or short positions). In the second chart below we show investor sentiment towards copper futures and we find a similar level of neutrality. Rallies in copper over the last several years have typically been associated with extreme short positions and negative sentiment. We are not there yet.