Price of Copper Signalling Inflation or higher Stock Market Prices

Price of Copper probably a bullish Development for the Stock market

Many pundits associate higher copper prices with inflation. This is the wrong metric to look at; higher copper prices are usually associated with an improving economy.

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 will provide copper with the force necessary 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.

 

Price of Copper Signalling Inflation or higher Stock Market Prices

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 here is probably going propel a lot of former naysayers to embrace this economic recovery.

Mass Sentiment is still Negative so Stock Market likely to Correct only

 

Combining this data with the action in the Copper markets leads us to believe that the stock market is more likely to experience a correction than an outright crash. Higher copper prices are usually indicative of higher stock market prices.  Therefore, the copper markets are confirming that the long term trend is still intact.

What about the Inflation issue?

The chart below puts an end to that argument for now. If inflation were an issue, the velocity of M2 money stock would be trending upwards. Until it starts to trend upwards, inflation is not an issue and the focus should be on higher stock market prices.

 

Conclusion 

Don’t focus on the noise; focus on the trend as it’s your friend and everything else is your foe.

 

Published courtesy of the Tactical Investor

 

Stock market corrections or stock market crashes

 

Stock market corrections or stock market crashes

Stock market corrections or stock market crashes: The Dow would have to drop below 9000 to break below the main uptrend line; an unlikely event in the near future. However, this does not mean it’s impossible. Every once in awhile the markets experience a monumental crash that can shave of as much as 60% of the Markets current value.   In this is instance we are using weekly charts; each bar on the chart represents one week’s worth of data.  Straight off the bat, you can see that back breaking corrections translate into long term buying opportunities.  Remember when there is blood in the streets and the masses are in panic mode, the opportunity is knocking.

Crashes are buying opportunities

Market Crashes are Buying Opportunities

The first zone comes into play at 16,000. If the Dow closes below this level on a monthly basis then there is a chance it could trade as low as 13,000.  However, based on the current market sentiment, there is very little likelihood of such a scenario coming to pass.  Mass Psychology is very clear when it comes to dealing with stock market crashes. Market crash on a note of Euphoria and bottom on a note of despair. Mass psychology states that optimum time to get into the markets is when the masses are in panic mode.

 

Anxiety index is a great market timing took

 

A fortress of support comes into play at the 13,000-13,500 ranges

To trade any lower than this level, the Dow would need to close below the above ranges on a quarterly basis. If it were to do that then the main uptrend line could be tested. Note that this trend will continue to trending upwards, so in 12 months, the trend line could move from the 9000 ranges to the 10,000 plus ranges.

Buy the Fear Sell the Joy 

The individuals who arrive at the party late are the first ones to come out and mistake a correction for a crash.The crowd panics when it sees blood in the streets; instead of joining the crowd do something different take advantage of stock market crashes and buy as the crowd dumps quality stocks and flees for the exits.

Crash or correction boils down to the angle of observance 

What is stunning to one, could appear ugly to another; it comes down to the angle of observance. Alter the angle and the image changes. Mass media and most experts try to alter the angle and direct you to see what they want you to see. They are in the fear “Selling Business” because fear sells, so they focus on creating a mountain out of a mole hill.

History clearly indicates that the Astute investors build very large stakes when there is blood in the streets.  Moreover, they keep building these positions as long as the main driving force is fear.  Take a look at the current Bull market; the Dow is trading at 22,000 and the masses are still nervous. It’s history in the making. The masses are always on the wrong side of the markets in the long run.

The astute investor always views financial disasters through a bullish lens.  Instead of panicking they take advantage of stock market crashes. 

Normality highly values its normal man. It educates children to lose themselves and to become absurd, and thus to be normal. Normal men have killed perhaps100, 000 of their fellow normal men in the last fifty years.
R. D. Laing
1927-1989, British Psychiatrist

Published courtesy of the Tactical Investor

 

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