Copper continues to rip to the upside, but one chart suggests that the entire Base Metals’ space is making upward progress.
Today we’re taking a look at that chart and what its implications are for Equities going forward.
Here’s our All Star Charts Equally-Weighted Base Metals chart that includes Copper, Aluminum, Nickel, Tin, Zinc, and Lead. Although it’s priced in US Dollar, its correlation with Emerging Market Equities is strongly positive and therefore we rely on it as a measure of risk appetite for Equities and other risk assets in general.
Click on chart to enlarge view.
With prices breaking back above multi-year support near 1,300, this is a major breakout that shifts the trend from down to sideways/up and a big positive for market bulls.
The leader of the recent strength is Copper, which has rallied over 50% from its March lows and is now above a nearly decade-long resistance level.
From a structural perspective, this is a major breakout that suggests further upside for many quarters and years to come. As long as prices are above 470 the bias is higher, which is positive for the entire Base Metals’ space and Emerging Market Equities.
In addition to being a tailwind for Equities in general, the correlation between the Nifty Metal Index and our Equally-Weighted Base Metal Index is strongly positive as well. As a result, we’re watching closely to see if Nifty Metal can break above resistance near 2,200 to confirm its next leg higher.
And here’s a closer look at the tight range that’s developed. How this resolves will be very important for stocks in the sector, as well as Indian Equities as a group (and play a big role in deciding the type of stocks we want to be buying).
This Base Metal strength is a major theme for us and one we touched upon at length in our Q2 Playbook, but we also discussed A LOT more themes across every asset class.30-day risk-free trial. Or sign up for our “Free Chart of the Week” to receive more free research like this.
Thanks for reading and please let us know if you have any questions!