Tuesday, June 15, 2021

Morning Note: Copper's feeling sick, but not to worry, doctors are standing by...

In our last few macro videos I suggested that copper could see some meaningful near-term downside action before it resumes what I suspect will be a fundamentally-based march further into all-time high territory.

Well, this morning it's seeing it, big time!

3-day chart of the front-month copper future contract:

The culprit, for the moment, appears to be primarily that China factor I mentioned.

From Bloomberg this morning:
"Copper prices fell on Tuesday to their lowest in more than seven weeks, as traders feared measures that the authorities in China, the biggest consumer of the red metal, would take to curb a recent price rally in commodities."

Bloomberg markets' Jake Lloyd-Smith and I agree on the overall setup:

"Copper is in a relatively weak spot right now and it will likely lose a bit more altitude, but given the long-term drivers it’ll surely be back."

And, make no mistake, the long-term drivers -- infrastructure spending and, in particular, the global push toward renewable energy -- are big. 

Asian equities mostly rallied overnight, with 10 of the 16 markets we track closing in the green.

Same for Europe so far this morning, with all of 3 of the bourses we follow trading higher as I type.

U.S. stocks are mixed at the open: Dow up 17 points, SP500 down 0.07%, SP500 Equal Weight up 0.05%, Nasdaq 100 down 0.33%, Nasdaq Comp down 0.28%, Russell 2000 up 0.04%.

The VIX (SP500 implied volatility) is up 2.44%. VXN (Nasdaq i.v.) is up 1.50%.

Oil futures are up 1.34%, gold's down 0.02%, silver's down 0.64%, copper futures are down 3.94% and the ag complex is down 0.91%.

The 10-year treasury is down (yield up) and the dollar is up 0.05%.

Led by energy stocks, uranium miners, AT&T, industrial stocks and Verizon -- but dragged by base metals futures, ag futures, MP (rare earth miner), solar stocks and base metals miners -- our core portfolio is off 0.13% to start the session.

I'm thinking this snippet from the daily devotional I published back in 2013 is timely:
"Like I said in “A Thousand Miles per Gallon,” we’re at the mercy of a few very bright, academically gifted appointees who’ve proven to be most adept at test-taking and, alas, mess-making. George Mason University professor Don Boudreaux (Boudreaux, 2011), blogging at cafehayek.com, puts it this way:
"It’s as if a person who is bleeding to death because of a gunshot wound in his stomach is brought to a physician. The physician correctly realizes that the patient is losing massive amounts of blood and, also, correctly understands that such blood loss is dangerous to the patient’s health. So the physician prescribes massive infusions of blood, period. If the patient doesn’t recover, the physician orders that the volume of blood-infusions be increased. If the patient dies, the physician will forever blame himself for not increasing the volume of blood-infusions even further. If the patient does recover, the blood-infusions will be praised for saving the patient.""
Yes, folks, any serious hints of economic or financial market stress -- as the real world attempts to adjust to a lesser degree of government "support" -- will have policymakers dosing back up those infusions, you can bet on it.

Have a great day!

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