Saturday, June 5, 2010

JJC : Copper Prices ETF , a leading indiactor of Economy

Copper prices are an indication of the industrial growth and hence a key factor for measuring economy strength. The ETF JJC tracks the copper prices. Let;s analyze this chart

The first chart is that of ETF JJC between Dec '08 and June '09
· We all know that the current uptrend in the stock market has begun in March ’09 .  When we  loook at  it closely   the copper prices have   started higher prices in Dec '08  itself and  confimed an uptrend  by  March '09. They  were screaming loud that there are signs of + ve economic growth and hence stock market is bound to go higher. This way always the copper prices have acted as a leading indicator.

· Now lets see today’s copper prices. Prices have recently broken symmetrical triangle to the downside or what we also call a double bottom break .
· Prices are in the most possible bearish alignment of closing below all the 20 day , 50 day, 200 day Exponential Moving Averages.

POINT AND FIGURE Technical Analysis

· The ETF currently trading at 36 has a BEARISH PRICE objective of 26
· The chart has broken the trend of making higher lows and higher highs and currently making a lower low and confirming a downtrend.
· I believe that if history is any guide , this ETf is surely suggesting a degrading economy and hence lower stock market prices. So fasten your seatbelts such that we are prepared for any roller coaster ride.

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