An idealist is one who, on noticing that a rose smells better than a cabbage, concludes that it is also more nourishing. – H. L. Mencken

Many pundits associate higher copper prices with inflation. While this is true to a degree, that is the wrong metric to focus on. Higher copper prices are usually associated with an improving economy.  For the past few years, Copper which is a leading indicator did not trend in sync with the markets.It was marching to a different drum beat, but a new trend could be in the works. 

Copper has traded past a key resistance point ($3.00), and it has managed to close above this important level on a monthly basis.The long term outlook for copper is now bullish and will remain so as long as it does not close below $2.80 on a monthly basis. Copper is facing resistance in the 3.20-3.25 ranges and as it is now trading in the extremely overbought ranges. As copper is now trading in the extremely overbought ranges, it is more likely to let out some steam before trading past this zone.A healthy consolidation should provide copper with the force needed to challenge the $3.20 ranges and trade as high as $3.80 with a possible overshoot to $4.00, provided it does not close below $2.80 on a monthly basis.

Now that copper has traded past $3.00 on a monthly basis,  the Fed deserves another pat on the back for they have managed to further cement the illusion that this economic recovery is real. Copper is seen as a barometer for economic growth, so pulling off a Houdini is probably going to propel a lot of former naysayers to embrace this economic recovery.

What about the Inflation issue?

Should we start to worry about inflation, now that copper prices are trending higher?We would prefer to look at it from a different angle; higher copper prices in the past were associated with an improving economy. For a long time, this indicator like the Baltic dry index diverged, but now it appears copper is dancing to the same tune as the Stock Market

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