Sunday, August 3, 2008

Dollar Enlargement: a look at Copper

last Monday I wrote that we should 'be on guard for an orthodox deflationary environment over the remainder of the year.' one requisite for this dynamic to take hold would be a break down in copper prices. I began looking at copper this weekend because the nowandfutures (great website, check it out sometime) blog just mentioned that 'real' growth in GDP in China has fallen down to the 3-4% range.

to me copper seems to be in a pretty precarious technical situation. look at the longer-term chart:

first notice the persistent failure to hit new highs in over two years (expect for that little fake-out in May). now any decline risks violating the prevailing bull trend line.

then the daily chart just looks extremely bearish to me.

a close below the 200 day moving average would appear to warrant a near-term price objective in the $3 range. platinum and palladium recently shit the bed, some of the ag contracts look very vulnerable still (though there are exceptions), and once oil breaches $120 things are gonna get tough all over.

imagine if commodities keep falling and the stock market doen't go up. or what if it even fell at the same time as oil &c? then throw in that the nippy carry trades are in danger of gettin bitch slapped. where does money go during a deflation? it disappears.