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S-T Copper Failure Could Expose L-T Vulnerability

Posted 01/03/2018 8:08AM CT | RJO Market Insights

Overnight’s failure below Fri’s 3.2600 initial counter-trend low is about as minor a momentum divergence as you’ll see, especially against the backdrop of a massive 2-year, 71% rally. But it nonetheless identifies last week’s 3.3220 high as one of developing importance and possibly the END of Dec’s portion of the secular bull from 05-Dec’s 2.9430 low. In this regard 3.3220 serves as an admittedly very tight but reliable risk parameter from which non-bullish decisions like long-covers and cautious bearish punts can now be objectively based and managed.
copper_240min_chart
copper_daily_chart
Concluding anything more than a hiccup of a correction against the massive bull trend would be subjective and presumptuous at this juncture following such a minor scale mo failure. However, ancillary elements typical of broader PEAK/reversal are present that should not be totally ignored, including:

  • historically frothy sentiment shown in the weekly log scale chart below
  • longer-term upward momentum that’s arguably been waning since early-Sep
  • the prospect that Dec’s rally from 2.9430 is the completing 5th-Wave of a massive 2-year Elliott sequence up from Jan’16’s 1.9355 low, and…

copper_weekly_chart

  • the Fibonacci fact that 28-Dec’s 3.3220 high fell less than half a penny from the (3.3267) 61.8% retrace of the entire secular bear market from Feb’11’s 4.65 high to Jan’16’s 1.9355 low on a monthly log scale basis below.

These peak/reversal-threat elements are obviously very interesting, but commensurately larger-degree proof of weakness remains absolutely required before concluding a major peak/reversal environment with any degree of objectivity. MINIMALLY, a failure below 05-Dec’s 2.9430 larger-degree corrective low remains required to even threaten, let alone break the 2-year uptrend. Prior to such a sub-2.9430 break, WEEKS of trending behavior down AND labored, 3-wave behavior on recovery attempts would provide an alternative threat to the long-term bull. In lieu of such proof we can only conclude an interim corrective setback and another buying opportunity for longer-term players. Shorter-term traders with tighter risk profiles are OK to step aside from bullish exposure at-the-market in order to circumvent the depths unknown of a correction or reversal lower. And even a cautious bearish punt would be OK from the 3.2600-area OB with a recovery above 3.3220 negating this call, reinstating the bull and exposure further gains thereafter. Acknowledging the exchange for whipsaw risk on a recovery above 3.3220, longer-term players are likewise OK to pare bullish exposure to more conservative levels in an attempt to re-establish these longs at lower, preferred risk/reward levels.

copper_monthly_chart

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