Doctor copper, can no longer be viewed as a leading indicator, in fact, a name change might be in order. A change of name from Dr Copper to deadbeat copper might in order, given its dismal record over the years. After the financial crisis of 2008-2009, the economy, the stock markets and copper parted ways; while the markets and the economy trended higher, copper plunged into an abyss, and it is still trying to find its footing. 

All Jokes aside, the reason copper is diverging from the markets is because the Feds destroyed the concept of a free market system long ago.  Copper is indicating that this economic recovery is nothing but an illusion. However, several rounds of QE, plus interest rates being held down for a record-breaking period, have altered reality. The markets are moving higher because of hot money, and the economic miracle would end without the low-interest rate band aid. Against such a backdrop, copper ceased to work. In this environment, fundamentals and basic technical analysis can lead you astray; in such an environment Mass psychology works the best. The masses have accepted that Fed intervention is the new norm and that the Fed is the saviour. Hence, this is what investors need to pay attention too, as the psychology of the masses is what drives the markets.  Given the old historical pattern between, copper and the markets, the stock market should have followed copper into the abyss, but instead we find that several indices are dangerously close from putting in new highs.

The chart below clearly illustrates how copper parted ways with the economy and the markets

The Dow, the NASDAQ and even bonds have soared to new highs while copper crashed. Surprisingly the only sector that took a similar path is Oil.  However, we suspect that oil will diverge shortly too. Now if the Fed’s really wanted to cement this illusion, they would create the forces necessary to give copper prices a boost. Up until 2011, copper trended with the markets and given the proper environment, copper could trend in tandem with the markets. Until, the hot money factor is eliminated from these markets Dr Copper cannot be viewed as a leading indicator.