Copper Market: what is it signaling today?

Copper Market: What’s Next

Updated March 2023

The Copper Market tends to bottom and top before the Stock market. Hence examining the copper market can provide valuable clues regarding market direction. Suppose the copper market tops after experiencing a strong rally. In that case, it should be an early warning sign that the stock market is in store for a significant correction.

The price of copper on an inflation-adjusted basis was higher in the 1915-1916 timelines than today, so much for the Hyperinflation garbage theory. Copper is a leading indicator that tends to bottom and top before the markets. Looking at the current action of copper, it appears that copper has enough mojo left for one more sprint. This sprint could take it to the 5.10 to 5.50 ranges, likely coinciding with a multi-month top.

Hence the argument that the markets will likely experience a more substantial correction in 2022 continues to gain traction. The markets have not experienced a robust correction for a while. They could shed 18% on the low end and 24 to 27 per cent on the high end. The odds are that the trend will remain intact, and this strong correction will lead to the birth of an even spunkier bull. Or it could simply reinvigorate the current bull. The bull born after the COVID crash is a hybrid bull that will put up a mighty fight before it surrenders.

Copper Market Outlook: March 2023

To navigate the dynamic and volatile financial markets, it is crucial to remain steadfastly focused on the prevailing trends while disregarding the extraneous noise. These trends serve as our allies, while all other factors can be considered potential adversaries. The recent surge in copper prices may be seen as a positive indication that the economic recovery is gathering momentum, and we must continue to monitor this trend closely.

Let us not allow ourselves to be sidetracked by extraneous distractions and instead concentrate our efforts on analyzing the underlying trends. The rise in copper prices may signify that the current economic turbulence is due to “manflation” rather than genuine inflationary pressures. However, as the US dollar is anticipated to reach a peak over the next several months in 2023, the North American continent will undoubtedly experience the true ramifications of inflation.

Inflationary environments are typically beneficial for stocks, but market activity can be turbulent and unpredictable. The initial stages of the upcoming breakout are expected to be volatile and range-bound, testing the patience of even the most seasoned investors. Nevertheless, this range-bound activity may well provide the foundation for the most auspicious buying opportunities in recent memory.

Inflation Outlook in 2023

Macroeconomic forces, such as rising inflation, energy costs, and interest rates, exerted significant pressure on copper in 2022, leading to fluctuations in price. Copper prices reached record highs in 2022, surpassing the US$10,000 per metric ton threshold for the first time in history, but were unable to maintain these gains and remained volatile throughout most of the year.

However, the world is currently grappling with a shortage of copper, fueled by increasingly challenging supply streams in South America and escalating demand pressures. The deficit is expected to inundate global markets throughout 2023, with some analysts predicting that the shortfall could continue for the remainder of the decade.

Copper is a leading indicator of economic vitality due to its incorporation in various essential applications, such as electrical equipment and industrial machinery. A copper squeeze may be interpreted as an ominous harbinger of escalating inflationary pressures and may compel central banks to adopt a more hawkish stance for longer. The correlation between copper and the S&P 500 index is robust because copper serves as a bellwether of economic health. In 2022, copper prices collapsed alongside significant stock indices as international monetary policy became more stringent.