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Does the Decline of Copper Mean Anything for US Stocks?


From the Buzz & Banter: Unlike during the Industrial Revolution, the value of copper may no longer strongly correlate with the strength of the US economy.

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

Copper Violates Major Support

Last Friday, I began writing about copper on the Buzz & Banter [subscription required]. Since then, copper has gone straight down, violating multiyear support and causing fear regarding the situation in China and other emerging markets to spike.
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A Changing Global Economy

Typically, copper is referred to as having a Ph.D. in Economics because it's used to actually build stuff. As the global economy has developed and matured, economic growth has shifted from building "stuff" to building "ideas."

In the new information age (where most economic activity is based on exchanging information and ideas, not tangible goods), copper is no longer as important to the global economy as it was during the Industrial Age.

Don't take my word for it -- just look at the charts. For years, copper has been going virtually nowhere or steadily falling, even as the major US averages have soared to record highs.
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Will This Time Be Different?

As always, I'll let the market decide. Until I see heavy distribution (institutional selling) in the major averages, I continue to give the market the bullish benefit of the doubt.
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