Copper continues to be an asset that I am watching closely, as the price action could be setting the table for a potential “buy the dip” scenario. The Fed will also have a part to play here.
Copper (HG)
The copper market has drifted a little bit lower to kick off the session, but turned around to show signs of life again.
On Tuesday, the market has been a little bit noisy, mainly due to dollar and yield pressure. Yields in America are rising yet again, and the U.S. dollar strengthening has done no favors for copper. But we also have an issue where Chinese industrial production grew at a respectable 5.2%, but retail sales are only up 0.4%. Property investment collapsed by 19.9% year over year, so that is a little bit of an overhang.
Structurally, though, copper's longer-term demand argument remains intact, as AI and data center construction will be gobbling up quite a bit.
From a technical picture, I look at this as a market that's trying to bounce
We are in an oversold stochastic oscillator area and getting a bit of a cross. The $6.50 level above was an area of support previously. If we can recapture that and break above the 50-day EMA, I think that would be a very good sign for copper.
Regardless, I do not short copper. I just don't do it, not in the environment we're in. There are so many different things working in its favor, not the least of which is a couple of mines in Chile running at about half capacity, making production of copper a little sluggish as well.
All things being equal, I'll be looking to go long in the copper market. All I need is a little bit of confirmation that momentum is returning, and I am willing to jump in myself.
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