While copper prices plunged by more than 3.0 percent Tuesday, the financial news media barely talked about it. Years ago copper prices were followed closely by all stock-market participants. In fact, legendary trader Jesse Livermore used to say that copper was one of the most important commodities that anyone could follow. He would use copper to predict future stock-market direction.
Traders can now track the action in copper by following the iPath Bloomberg Copper Subindex Total Return Sub-Index ETN (NYSE:JJC). On Tuesday morning, the JJC traded lower by 0.87 cents (-3.59 percent). Technically, the pattern on the daily and weekly charts looks very poor, with JJC trading below its daily chart 50- and 200-day moving averages. The JJC peaked in February 2011 at $61.69 a share. The next major support level on the JJC chart is the December 2008 low, which was $17.97.
It appears that the major stock-market institutions no longer care about the price of copper. This former leading indicator remains extremely weak and could be signaling further economic problems in China and other emerging markets. Until the copper price forms a definitive bottoming pattern, it is best to steer clear of this commodity. We can only wonder if copper will ever matter again when it comes to predicting stock-market direction.
