Since its decline of 23% that began at the end of May and bottomed in the middle of August, copper has recovered about 11%, and now sits about 8.5% above those August lows. As impressive as that reads, it’s hardly in a bull-trend and even though it has technically pulled out of a bear market relative t its recent high, it remains in correction territory. In fact, if you go back to the high of 3.322 in the NYMEX continuous copper contract the base metal is still down 16.6%. The obvious takeaway is that copper is still closer to bear market territory than it is to coming out of correction territory (a bear market is measured by a 20% or greater decline from recent cycle highs, correction territory is measured by and 8%-10% decline from the highs of the most recent rally).
The Good News
Copper’s entire decline is due to the trade tensions between the U.S. and China and the subsequent tariffs place on each country by the other. Dollar movements and blips in either direction from Chinese economic data move copper on a daily basis, but if you just take the last 8-9 weeks, the metal’s price has existed in a relatively small band between 2.67 and 2.85. This is the definition of basing; a rally off of the extreme low then a period of sideways movement. Copper is also basing near the top end of the old sideways channel which held from late November of 2016 until the breakout trend to new highs in late July of 2017. The Trump/Xi meeting in Buenos Aires is approaching in the first week of December and while the price is still below the 200-day moving average, which seems a reasonable target if the is an even mild breakthrough in the trade talks between the leaders. That would amount to a 5.5% rally from current a price, which wouldn’t eliminate the correction territory status from the 2017 highs, but would eliminate the bear market status and that’s a good start. Every new bull market needs to start somewhere.