Trail Copper Bear Risk to $2.5225

December 27, 2016 3:02AM CST

Today's break to yet another new low for the past month's suspected correction leaves 21-Dec's 2.5225 high in its wake as the latest smaller-degree corrective high it needs to sustain losses below to avoid stemming the downtrend with a confirmed bullish divergence in the RSI measure of momentum shown in the 240-min chart below.  Per such, 2.5225 is considered our new short-term risk parameter to an interim bearish count introduced in 29-Nov's Technical Blog warning of a larger-degree correction lower.

Copper 240 min

Copper Daily

At a still-frothy 81% reading in our RJO Bullish Sentiment Index shown in the weekly chart below reflecting 102K Managed Money long positions reportable to the CFTC versus just 23K shorts, this market may remain vulnerable to further losses in what we suspect is just a correction of Oct-Nov's steep, impressive rally that arguably breaks the secular bear trend.  Against this major base/reversal-threat environment we believe the range from 15-Nov's 2.4260 (4th-Wave) corrective low to 18-Mar's 2.3235 high that capped eight months of resistance will provide the end to this suspected correction and new supportive floor for the next major segment of a new secular bull move in copper prices.  But prudently navigating such a prospective end to this correction and favorable risk/reward buying opportunity STARTS with a confirmed bullish divergence in momentum.  Herein lies the importance of even an admittedly smaller-degree corrective high and short-term risk parameter like 2.5225.

Copper Weekly

The monthly log scale active-continuation chart below shows the technical facts that warn of a major reversal to the secular bear market from Feb'11's 4.65 all-time high to Jan'16's 1.9355 low.  These facts include:

  • a confirmed bullish divergence in MONTHLY momentum that broke the long-term downtrend
  • historically bearish sentiment that had not been seen in 14 YEARS
  • the decline from Feb'12's 3.9895 corrective high spanning a length 1.618-times that the 2011's initial 4.65 - 2.9940 decline.

Thus far and in fairly short order the market has retraced 50% of the 5-year bear market from 4.65 to 1.9355.  But this merely derived Fib retracement is grossly insufficient evidence to conclude a major top rather than an interim one with an intervening correction ahead of an eventual resumption of this major base/reversal count.

These issues considered, a bearish policy remains advised with strength above 2.5225 required to stem the past month's slide and define a more reliable low and risk parameters from which non-bearish decisions like short-covers and cautious bearish punts may be objectively based and managed.  In lieu of such 2.5225+ strength further losses remains expected.

Copper Monthly

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