It's Time to Sell Copper

Dr. Copper is crumbling.

The versatile industrial metal best known as a bellwether for worldwide economic growth has finally hit the skids…

I warned you last month that copper was fast approaching an important inflection point. Now, the Cyprus crisis was kind enough to tip copper over the edge. It fell hard in late Sunday trading from $3.50 to $3.44.

The massacre continued into Monday. When the dust settled, copper found itself nearly a dime below critical support…

Yet while the world economy appears poised for a slowdown, U.S. stocks continue to fight off lower copper prices for the past 15 months. The S&P has defied copper’s weakness since the metal peaked in 2011…

The price of copper had been dangerously close to crashing since the beginning of March. Now that its multiyear uptrend is in the rearview, we’re in store for lower prices.

Huge inventory surpluses have helped push copper lower. In London, copper stockpiles rose to 543,925 tons yesterday, the highest level in 3 years. In Shanghai, stockpiles climbed to 231,872 tons, the highest level recorded since 2003, according to Bloomberg.

If you haven’t sold copper yet, this key turning point is your cue. $3.30 is my initial downside target. If weakness persists, we could see copper test its 2011 lows near $3.

Greg Guenthner
for The Daily Reckoning