Our check-up with Dr. Copper shows signs of improvement for the commodity.

Remember, these are technical comments only. Just as you must be aware of fundamental data for the stocks we recommend based on technical criteria in the report, so too must you be aware of important data regarding delivery, market moving government releases, and other factors that may influence commodity pricing. We try to limit our technical comments to the most actively traded contracts in advance of delivery, but some contracts trade actively right up to delivery while others taper off well in advance. Be sure you check your dates before trading these contracts. For questions regarding this section or additional coverage of commodities email james.west@dorseywright.com.

Data represented in the table below is through 06/23/2020:

Broad Market Commodities Report

Portfolio View - Commodity Indices

While analogies continue to surface about the potential disconnect between the stock market and the economy, key reminders of the market being a leading indicator are also increasing in circulation. Although generally true, the stock market is not the sole leading indicator of economic expectations. In fact, probably to little surprise, there are a number of such indicators that take shape outside of equities, and in the commodity space. Today we will highlight copper, or “Doctor Copper” in market lingo, focusing largely on the recent technical improvements for this alternative leading indicator. As a refresher, copper is often referenced as a leading economic indicator due to its fundamental and wide-ranging application in industrial production and electrical equipment (source: investopedia.com). Rising demand for copper will typically manifest in higher market prices, consequently suggesting the potential for economic growth. According to the Eurasia Group, in the current environment, two large catalysts for copper demand stem from green and digital stimulus programs. This demand is centered predominantly in Asia and Europe as electric vehicles, 5G networks, and renewable power generation remain in focus (source: cnbc.com). As countries begin to work through the lingering effects of the COVID-19 epidemic, we note an increased demand for copper that has translated into an improved picture in the near-term.

From a technical perspective, the shorter-term chart ($0.02 scale) for Copper Continuous HG/ shows resounding strength on the back of six consecutive buy signals following its multi-year low of $2.12 that was established in March. Additionally, copper’s recent ascent back into a positive trend on this near-term chart set the stage for a further advance past resistance established in February of this year. HG/ has formed a double top at $2.66 and a further advance to $2.68 would offer additional bullish confirmation to the upside with a seventh consecutive buy signal. Support is offered at $2.56 on the $0.02 chart.

A similar picture of strength is displayed on the iPath Series B Bloomberg Copper Subindex Total Return ETN JJC. The note seeks to provide exposure to the Bloomberg Copper Subindex Total ReturnSM Index, which tracks unlevered futures contracts on copper. JCC displays similar chart action to HG/ and is on a fourth consecutive buy signal in a newly-established positive trend. Monthly momentum has recently flipped positive as well, suggesting the potential for further gains. JCC is actionable here with a solid fund score of 3.50 on the back of a positive score direction of 2.10. Note that support is offered at $39.50.