Copper’s mystery rally

It is a “mystery” because many analysts are groping for a reason to describe a move of this extent.

chart_16-11-08_14-53-42

I might add, some am I.

The wire reports are blaming traders looking at improving conditions in China which is bringing buying into the industrial metals in general, but especially into copper.

As far as the culprits behind this rally, blame it on the usual suspects, aka, hedge funds.

copper-cot

Remember, these are the same geniuses that shoved natural gas prices into the stratosphere before it had a spectacular collapse of 25%. And why pray tell did they do that? Answer – because they could.

I suspect this is much the same with the copper market. They found a market that they could push and in they have come. Perhaps the Chinese economy is now going to grow at a fast enough clip to justify a sharp rise of this magnitude in copper. Perhaps not.

From a chartist’s perspective, there is no sign of any concerted selling efforts large enough to absorb all of that manic buying as of yet.

Some of this is also in response to traders pricing in a Clinton victory as I have stated many times here of late, that means the status quo continues so RISK is back in vogue. In other words, the same reason we are seeing US equity markets soaring is the same reason we are seeing copper soaring – traders are buying risk and shunning safe havens.

We’ll have to wait to see the price action after the results come in tonight to see how much of this has now been built into current price levels. An 8% jump in copper prices over the last 7 trading days seems to me to have baked in quite a bit of optimism for a Clinton win.

We’ll know soon enough.

For now, if you are going to buy copper, be prepared for some volatility as the hedgies may have run this thing too far, too fast and that means some backing and filling is probably in order.