Dr Coppers temperature rising

Yesterday it was noted that despite a sharp increase in Covid-19 cases in recent weeks, risk assets had weathered the storm well. This resilience was on display again overnight as key equity markets closed higher, despite a new record of 51,000 infections in the U.S., ahead of the July 4 long weekend.

Charts (3)

Markets becoming more optimistic that the spread of the virus and its impact can be contained without incurring the economic cost of a shutdown, providing necessary precautions are taken. The Governor of Texas Greg Abbott, conveying this exact message overnight.

“We need to refocus on slowing the spread. But this time we want to do it again without closing down Texas again.”

Outside of equity markets, evidence of optimism can be observed in the price of copper, a metal that is widely used throughout the real economy and whose rise and fall is looked at as a thermometer of sorts to assess the health of the global economy.

As viewed on the weekly chart below, following its capitulation in March, copper has reclaimed all of its March losses and more to be testing the weekly trendline resistance at 2.770ish, which comes from the downtrend line from the June 2018 high of 3.3155. With a clear stop loss on offer above  2.7750 and commodity bulls coming out of the woodwork at a pace making me little nervous, short term traders may consider a tactical short trade in copper.

Dr Copper’s temperature rising

Alternatively, for those that are bullish copper yet concerned above the overbought nature of the rally, which is now showing early signs of bearish RSI divergence as viewed on the chart below, I would consider waiting for a pullback towards the uptrend support 2.5800 area to enter longs.

Or alternatively waiting for a sustained break above 2.7750 as the catalyst to consider longs, looking for the rally to extend towards the January 2020 high of 2.8860 and then the April 2019 high at 2.9955.

Dr Copper’s temperature rising

Source Tradingview. The figures stated areas of the 3rd of July 2020. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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