Copper market’s topping action confirms recession – stocks can drop abruptly
Peter Oberois
May 15, 2007

The copper and other industrial metals are falling. The typical topping action is precursor to major economic slowdowns. Normally copper market tops or bottoms twelve to eighteen months before a major recession. The topping action involves recognizable patterns of distribution and lowered forward contracts. The patterns match the overall schema of distribution of futures and copper market derivatives.

The problem of the copper market comes from several directions. First is the slowdown in residential real estate construction. The second is the probable timetable for troops withdrawal from Iraq. The third reason is Chinese Government’s efforts to slowdown the Chinese economy to avoid hyperinflation. The most important reason is the abundance of scrap copper in the market as copper rallied more than 400% in the last four years.

The copper market’s topping action confirms recession. It tells us go long bonds and short stocks. The stock market can drop abruptly as the economy tanks. The demand and supply equation in the copper market has turned towards the bearish camp.

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