Copper Calls Top in Stocks. Wait…What?

Copper, apparently, is a pretty good predictor of stock prices.

The stock market may be headed to or already mired in a correction mode, with the price of copper among the signals telegraphing caution for equities.
“Copper prices recently recorded a 12-month rolling rate of return in excess of 150%. Historically such a ‘copper cropper’ has market a ‘grading top’ in copper and telegraphed caution for the equity markets,” writes Jeffrey Saut, an investment strategist at Raymond James.
Not all, however, agreed with Saut’s take.
“I still believe the uptrend is currently in place, that we’re in a full-fledged bull market,” said Robert Pavlik, chief market strategist at Banyan Partners LLC.
While copper futures hit a new high earlier this month, “there is no indication in the five-month chart that copper is about to approach a correction of any sort,” said Pavlik.
Used in both residential and commercial construction, copper has long been dubbed the metal “with the PhD” due to its ostensible ability to forecast changes in the economy based on its pricing and demand.

And if you’re planning on converting your entire retirement nest egg into pennies, think again. A modern penny on only one part per 40 copper, the other 39 parts are zinc.
The old alloy (pre 1982) was 95% copper and just 5% zinc. The metal in that penny is now worth more than one penny. The government, however, has made melting them down a crime.

Posted by on January 20th, 2010 at 2:58 pm


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