[Premium] Base Metals Finally Succumb To Selling

JC Parets
October 1, 2020

The price action in Copper is incredibly important for Indian stocks and Emerging Markets in general, which is why it's one of the primary intermarket signals we watch.

After a massive run off the March lows, we saw prices of Copper meet their upside target in late August and begin to consolidate.

Now we're seeing that consolidation resolve lower, so what's next?

First, let's start with the daily chart of Copper we've been using as our roadmap. Prices met our price objective near 540 in late August as momentum diverged negatively. Now, we're seeing prices resolve lower to set up for a crucial retest of its long-term breakout level near 470.

Click on chart to enlarge view. 

We're also seeing the same action in other Base Metals like Zinc, which failed to get above resistance near 200 and is now selling off.

And here's some perspective on the longer-term chart of Copper. How prices react to the 465-470 level will be extremely telling about the appetite for risk assets among market participants.

On that same note, we're continuing to wait for this consolidation in USD/INR to resolve itself. If the US Dollar strengthens and this pair gets back above 74.50, then we're likely in an environment where Copper, Equities, and other cyclical/risk assets are struggling. But for now, the benefit of the doubt remains in favor of the bears in USD/INR.

The impact of the US Dollar is being felt around the globe across all asset classes. How it resolves itself will determine the long-term viability of the "reflation trade" we've been talking about for months.

The jury is still out on that broader theme, but for now, it's clear that we do not want to be long Copper or any of the other Base Metals as we wait to see how these corrections play out.

Thanks for reading and please let us know if you have any questions.

Allstarcharts Team

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