Resumed Slide, "Outside Day", Still-Frothy Sentiment Continue to Threaten Copper Bull

January 16, 2018 9:08AM CST

Today's clear break below the 3.2900-handle-area that has supported the market for the past week reaffirms our peak/reversal-threat count introduced in 03-Jan's Technical Blog and leaves overnight's 3.2910 high in its wake as the latest smaller-degree corrective high this market is now minimally required to recoup to arrest the sell-off attempt from 28-Dec's 3.3220 high, render it a 3-wave and thus corrective affair and resurrect the 2-year uptrend. In lieu of such 3.2910+ strength at least the intermediate-term trend is down and should not surprise by its continuance or acceleration. In this regard 3.2910 is considered our new short-term risk parameter from which a recommended cautious bearish policy and exposure can be objectively rebased and managed.

To this point the sell-off from 28-Dec's 3.3220 high is only a 3-wave structure that, against the backdrop of a new secular bull trend, easily falls within the bounds of a corrective/consolidative affair ahead of a resumption of the major bull. Indeed, the relatively minor setback from 28-Dec's 3.3220 high is thus far of a scale insufficient to conclude anything more than another interim corrective dip. But until and unless this market recoups 3.2910, it is not premature to act on the premise that today's decline from 3.2910 is the 3rd-Wave of a more protracted move south.
copper_240min_chart
copper_daily_chart
Contributing to a peak/reversal-threat environment is today's prospective "outside day down" resulting from a higher high, lower low and lower close than Fri's range and close. In fact, the market is working on an "outside WEEK" if it can close out this week below Fri's 3.2185 close.

Additionally, the weekly log scale chart below shows still-frothy levels of bullish sentiment that have recently produced some of the most bullish views by the consensus in over 10 years. And while the market has yet to confirm a bearish divergence in momentum on a scale sufficient to break the long-term uptrend, even the past couple weeks' erosion cannot be ignored as a factor that brings this contrary opinion factor into the bull-vs.-peak/reversal fray.
copper_weekly_chart
Finally, it's clear that the extent of the 2-YEAR uptrend from Jan'16's 1.9355 low is sufficient to break the secular bear trend from Feb'11's 4.65 all-time high. But the fact that these peak/reversal-threat factors are unfolding with 28-Dec's 3.3220 high just a smidge away from the (3.3267) 61.8% retrace of the entire 2011 - 2016 decline on a monthly log scale basis below adds another element to this peak/reversal-threat environment.
These issues considered, a cautious bearish policy and exposure from 3.2600 OB remains advised with strength above 3.2910 now required to threaten this call enough to warrant its cover. In lieu of such 3.2910+ strength further and possibly accelerated losses are expected straight away. Former 3.2125-area support is considered new near-term resistance.

copper_monthly_chart

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