Is Copper Broken Or Just About To Turn?

“Neither can the wave that has passed by be recalled, nor the hour which has passed return again.” - Ovid
 
On April 15th, I posted a piece titled If Global Growth Has Topped, Why are Copper Miners Bottoming?.  At the time, I noted that “the odds of a mini-correction have risen, and [I] even sent out a tweet to followers of my thinking that our models, run for client accounts, have repositioned us largely into bonds. This is likely a near-term move, as this is in many ways the environment to see if the Spring Switch will occur. One of the reasons I think this is likely a shallow and short-lived correction is Copper.”
 
My argument related to what appeared to be a potential return to leadership in Copper Miners relative to the S&P 500, as early signs of a strong bounce off of a ratio support level were then underway.The market did recover strongly afterwards, but broke down again in recent weeks.

Below is an update to the price of Global X Copper Miners ETF (COPX), relative to the S&P 500 (IVV). As a reminder, a rising price ratio means the numerator/COPX is outperforming (up more/down less) the denominator/IVV.

The ratio failed to launch past the Support level, and broke down fairly substantially last week as concerns over a Greece eurozone exit flared up, coinciding with on-going concerns over China. Over this weekend, the People’s Bank of China decided to lower ratio reserve rates in an effort to stimulate and counter slower growth. It is unclear what the market reaction will be given that the break of Support is undoubtedly negative.

Correction odds remain high given various intermarket trends I track in the near-term, which means several more weeks are needed to get comfortable with an aggressive long play in the stock market. Ideally, a return to an uptrend in broader stocks should coincide with leadership in Copper Miners.

Disclaimer: This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.