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Copper Bubble Update


This is more of a psychology lesson but backed by a slowing economic backdrop.


If it looks like a bubble, and it smells like a bubble, is parabolic like a bubble, then it most likely is a...bubble! And we know how they complete the pattern - they break! Ka-boom!

Again, I am NOT a copper expert, but rather a broad market expert (I use that phrase lightly, mind you). So I looked at the Fibonacci weekly pattern for copper, shown below. Presumably, a global economic pattern of weakness highlighted by weakness in housing backs this view along with the break in the CRB, as previously highlighted by Toddo, myself and others.

So where could it go if it breaks? Take your pick. 238, 194, or even 144. That would be my best guess as bubbles often retrace all of the moves to the multi-year breakout and this would be a 76% retracement of the entire move, not unlike the break in the NDX which was in the 80-85% retracement area - see that NASTY chart below. Sorry to remind you all of that one if you suffered from it.

This is more of a psychology lesson but backed by a slowing economic backdrop. While not a prediction, stocks like Phelps Dodge (PD) and Freeport-McMoRan Copper & Gold (FCX) could be ripe for a downside whack, and I defer to Prof. Succo if the puts look appropriately priced. One thing's for sure. I am staying as far away from this group as possible! Just my take.

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No positions in stocks mentioned.

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