Commodities Weekly: Base Metals Hang Tough as Copper Corrects

From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley

June is officially in the books!

Now, it’s time to dig into a fresh batch of monthly candles…

As everyone prepares to celebrate over the long weekend, we’re pouring over our monthly charts to reconnect with the primary trend.

And we witnessed some key developments in the commodity markets in June that are hard to ignore:

• Lumber was down almost 45%
• Copper was down 8%
• Natural Gas was up 24%
• Crude Oil was up 10%

Tumbling lumber futures and copper’s failure to hold above its former 2011 highs raised caution for risk assets.

On the flip side, natural gas and crude oil continued to show strength, supporting the potential rotation into energy we highlighted in last week’s post.

But what stands out when reviewing our charts is the resiliency of other base metals as copper prices correct.

Let’s take a closer look at a few charts that go beyond good old Dr.Copper.

First up is our Equal-weight Base Metal Index:

What catches our eye here is the continued strength among base metals at the index level. 

Our base metals index hit our 1,400 target when Copper peaked in early May. Meanwhile, the index pushed to new highs, even as copper continues to chop below overhead supply.

That’s obviously not the case for other base metals…

Here is the monthly chart of Tin futures:

Tin has found resistance on shorter timeframes. But when we zoom out, it finished June at new all-time monthly closing highs. The primary uptrend is definitely intact.

Plus, a structural bull market in tin may just be getting started with a possible decade-long base breakout on a monthly closing basis.

We want to remain long tin futures if and only if we’re above 28,350 with a long-term objective near 43,600.  

Last but certainly not least, Steel futures:

Steel futures relentlessly push to new highs, slicing through our upside objectives with little hesitation. It’s closed higher for 11 months in a row and has gained over 270% in the last year. 

That’s strength.

From a longer-term perspective, we can be buyers of steel futures as long as we’re above 1,705 with a target near 2,535 over the next 6-12 months. However, steel is off limits if we fall back below 1,705.

It’s easy to forget that copper, one of the most economically sensitive commodities, failed to hold above its former highs when looking at a chart of steel or tin.

But the strength we’re seeing in base metals is undeniable. Plus, it's a strength we haven’t seen for over a decade.

Copper will most likely continue to correct in the coming weeks and months. And broad strength among base metals suggests an upside resolution.

As always, let us know what you think. We love hearing from you.

Thanks for reading, and be sure to download this week’s Commodity Report below!