Copper forecast: Signaling Higher Stock Market Prices

Copper Forecast: Bullish Market Signal

Updated March 2023

Many pundits believe that higher copper prices are a sign of inflation. However, this metric is often misinterpreted. In reality, higher copper prices are usually a positive indicator of an improving economy.

Copper has recently surpassed a key resistance point of $3.00 and has managed to close above this level on a monthly basis. This bodes well for the long-term outlook of copper, which is now bullish. As long as it does not close below $2.80 on a monthly basis, this positive trend is likely to continue.

Currently, copper faces resistance in the 3.20-3.25 ranges and is trading in a highly overbought state. Therefore, it is more likely to experience some corrections before trading past this zone. A healthy consolidation period will provide copper with the necessary force to challenge the 3.20 range and potentially trade as high as $3.80, with the possibility of overshooting to $4.00. However, copper mustn’t close below $2.80 on a monthly basis to maintain this positive trend.

Overall, the outlook for copper is positive, and it will likely continue to serve as an indicator of economic growth.

Since copper has now surpassed the $3.00 threshold on a monthly basis, the Federal Reserve deserves recognition for its role in reinforcing the perception of an authentic economic recovery. Copper is regarded as a significant indicator of economic growth, so this achievement may persuade sceptics to accept the existence of this recovery. Thus, the Fed’s success in pulling off this feat may lead to an increased acceptance of the economic recovery.

Sentiment Suggests Market Correction, Not Crash

When we consider the information provided and the activity in the copper markets, we can infer that the stock market is more likely to experience a correction than a complete crash. This is due to the historical correlation between higher copper and stock market prices, suggesting that the long-term trend is stable.

Furthermore, the copper forecast chart below refutes the argument that higher copper prices indicate inflation. If inflation were a concern, the velocity of M2 money stock would be on the rise, which is not currently the case. As a result, attention should be focused on the possibility of higher stock market prices as the copper markets continue to signal the persistence of the long-term trend.

It also clearly indicates that the next crash will break a lot of backs, but it will pave the way for the mother of all buying opportunities. The preferred word at TI is Back Breaking correction. Tactical Investor August 19, 2020.

The above has since come to pass.

Copper Forecast Update March 2023

It’s essential to remain focused on the trend rather than being swayed by the noise, as the trend is our ally while everything else can be considered our foe. The recent copper price increase could be a positive sign that the economic recovery is gaining momentum, and we should continue to monitor this closely.

Let us not be distracted by the noise; instead, let us focus on the trend, for it is our friend, and everything else is our foe. The rising price of copper could be a positive sign that the economic turmoil is due to “manflation” and not real inflationary forces. However, as the dollar is expected to peak for several months in 2023, North America will finally understand the true meaning of the word inflation.

Inflationary environments tend to boost stocks, but the action can be volatile. The initial stage of the next breakout is likely to be volatile and rangebound, which will test the patience of most market participants. However, this range-bound action will create the foundation for a mother of all buying opportunities or a father of all buying opportunities.

Copper is a leading economic indicator, and the monthly charts suggest that the MACDs are about to experience a bullish crossover. The upward trend in copper is encouraging for the overall stock market. Astute investors may want to consider deploying capital in copper stocks such as FCX, SCCO, and CPPMF for speculative plays.

Concluding thoughts

Macroeconomic factors, including rising inflation, increasing energy costs, and climbing interest rates, impacted copper in 2022, putting pressure on prices. Copper prices hit an all-time high in 2022, surpassing the US$10,000 per metric ton mark for the first time, but were unable to sustain these gains and were volatile for most of the year.

However, the world is currently facing a global copper shortage, fueled by increasingly challenging supply streams in South America and higher demand pressures. The deficit will inundate global markets throughout 2023, and one analyst predicts the shortfall could extend throughout the rest of the decade.

Copper is a leading pulse check for economic health due to its incorporation in various uses, such as electrical equipment and industrial machinery. A copper squeeze could indicate that global inflationary pressures will worsen and compel central banks to maintain their hawkish stance for longer. Copper’s price collapsed alongside major stock indices in 2022 as international monetary policy tightened. A strong correlation between the S&P 500 and copper exists because copper acts as a bellwether for economic health.

Although the current copper price trend is volatile, copper stocks will likely rise. In light of the global shortage, investors should focus on copper stocks such as FCX and SCCO. The increasing demand for copper and supply shortages are expected to drive the stocks of companies that produce the base metal as copper becomes an increasingly sought-after commodity.

FAQ – Copper Forecast

Q: What is the current outlook for copper prices?
A: The outlook for copper is positive, with higher prices often indicating an improving economy. Copper recently surpassed a key resistance point of $3.00 and has managed to close above this level on a monthly basis, suggesting a long-term bullish trend.

Q: What is the correlation between copper prices and the stock market?
A: A historical correlation between higher copper prices and stock market prices suggests that the long-term trend is stable.

Q: Does higher copper prices indicate inflation?
A: Higher copper prices are usually a positive indicator of an improving economy and not necessarily inflation. The velocity of M2 money stock would rise if inflation were a concern, which is not currently the case.

Q: What is the copper forecast for 2023?
A: The world is currently facing a global copper shortage, and the deficit is expected to inundate global markets throughout 2023, and one analyst predicts the shortfall could extend throughout the rest of the decade. The monthly charts suggest that the MACDs are about to experience a bullish crossover, which is encouraging for the overall stock market.

Q: Which copper stocks should investors consider?
A: Astute investors may want to consider deploying capital in copper stocks such as FCX, SCCO, and CPPMF for speculative plays. In light of the global shortage, investors should focus on copper stocks such as FCX and SCCO, as the increasing demand for copper and supply shortages are expected to drive the stocks of companies that produce the base metal.

Research: Copper Demand & Stock Prices

These articles provide a good overview of the relationship between copper, copper stocks, and the stock market and how investors can exploit this trend.

“Why Copper and Base Metals Will Lead the Commodity Rally” – This article from The Motley Fool explains how the rising demand for copper and other base metals will drive the commodity rally and impact copper stocks.
“Why Copper Is the New Oil” – This article from Barron discusses the growing importance of copper in the global economy and how this is creating opportunities for investors in copper stocks.
“Copper Stocks Soar as Metal Prices Surge” – This article from The Wall Street Journal explores the relationship between rising copper prices and the performance of copper mining stocks and how investors can take advantage of this trend.
“Why Copper is Critical to the World Economy” – This article from Forbes explains how copper is used in a wide range of industries, including construction, electronics, and transportation, and why this makes it a crucial indicator of global economic health.
“The Stock Market and Copper: A Positive Correlation” – This article from Investopedia explores the relationship between copper prices and the stock market and how investors can use this information to make informed trading decisions.
“Dr. Copper, the stock market’s outside barometer, is about to be put to the test” by Mark Hulbert, MarketWatch (https://www.marketwatch.com/story/dr-copper-the-stock-markets-outside-barometer-is-about-to-be-put-to-the-test-11649867081
“Why Copper Is the Metal to Watch Right Now” by Reshma Kapadia, Barron’s (https://www.barrons.com/articles/why-copper-is-the-metal-to-watch-right-now-51615433200)\
“Copper price is high, but copper stocks are a bargain” by Trefis Team, Forbes (https://www.forbes.com/sites/greatspeculations/2021/05/17/copper-price-is-high-but-copper-stocks-are-a-bargain/?sh=5e6a25bf54f8)