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Copper Crashes, In Danger Of Breaching 15-Year Support Level

Tyler Durden's picture




 

While the PBOC was literally everything in its power to keep the SHCOMP green (it was too late to save the Shenzhen, the Chinext or most Chinese stocks as the PBOC's firepower was limited to just the largest companies), it forgot about that other proxy of overall Chinese health: copper which, as the chart below shows, plunged by 4% to the lowest price since February when the oil commodity crash left everyone speechless and was threatening to destroy the entire junk bond space.

 

But while in this centrally-planned world, in which nobody even denies anymore that all markets have become central banker playthings, fundamentals are irrelevant and few have a clue what this latest crash in copper may signify (some do, and it isn't pretty) an even more disturbing clue for the fate of this erstwhile "market doctor" is revealed when looking at the long-term price chart. Here, as SocGen notes, copper is in danger of breaching a huge 15 year support line... after which it is free fall for a long, long time.

From SocGen

Copper is probing again the 15-year trend line support (5550 levels).

 

After hitting the multi-year channel upper limit a month ago (now at 6330), Copper has embarked on a steady yet steep downtrend and is now probing again the 15-year trend line (5550 levels, monthly log chart). Copper tested that trend line support during last January sell-off but eventually did not close below on a monthly basis. In the event of a definite close below, the down trend would regain bearish momentum and therefore extend towards 5250/5170 (2007 lows) and possibly even towards the channel support (5000) which has encompassed the down move over the last 2/3 years.

 

Near term, the down trend in force since early May looks relentless and vivid as underlined by the bearish channel (5710-5460) but, as such, is starting to look overstretched. Daily RSI has indeed achieved a multi-month support (blue line).

 

Thus, 5550 (excess possible at 5460 intraday) appears to be a key and pivotal support. It will however take a break above the graphic resistance at 5630/40 and more importantly above the channel resistance at 5710 for a meaningful rebound to materialize.

 

Will the PBOC step in to also rescue this flashing red asset class, or will the last remaining indicator of global economic health (or lack thereof) be left to fend for itself and be the latest confirmation that excluding central bank support of all stocks around the globe, the world is now gripped by an unprecedented economic depression.

 

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Mon, 07/06/2015 - 09:38 | 6276035 JustObserving
JustObserving's picture

In the false reality created by Central Banksters, real commodities  have no value while fiat conjured up on demand is the only thing of value

We're an empire now, and when we actwe create our own reality

Mon, 07/06/2015 - 09:44 | 6276075 Waylon Bits
Waylon Bits's picture

Waylon Bits reccomends that a small allocation of your bug out bag be in physical copper... about 85% or so.

Mon, 07/06/2015 - 10:12 | 6276103 JustObserving
JustObserving's picture

Bonds surging as reality is being ignored:

 

Fed says inflation in USA was 0.8% in 2014.  Chapwood Index says it was 9.7%.  So what are the consequences?

Let's use a Zero Coupon Bond Calculator to see the effect of fake inflation on a $1000 bond  for 30 years:

A zero coupon bond is a bond bought at a price lower than its face value, with the face value repaid at the time of maturity

With Fed's 0.8% fake inflation, Zero Coupon Bond Value = $787.38

With Chapwood inflation of 9.7%, Zero Coupon Bond Value = $62.20

So with Fed's inflation assumption, you can borrow $787.38 for 30 years and pay $212.62 as interest

With Chapwood inflation, you borrow $62.20 for 30 years and pay $937.80 as interest

With Chapwood Index, if you borrow $787.38 for 30 years, you pay $11,871 as interest.  Or 55.83 times  that with the Fed's inflation  adjustment.

http://www.chapwoodindex.com/

Mon, 07/06/2015 - 10:45 | 6276281 kaiserhoff
kaiserhoff's picture

Well done.

We should remember that, at this point, all bonds are much worse that ZERO  COUPON,

  since in real terms, they all have sharply negative interest rates.

Mon, 07/06/2015 - 10:03 | 6276134 Kirk2NCC1701
Kirk2NCC1701's picture

Let's see who (and their Bugout Bag) benefits from this, once again:

CHINA, Preppers with money to burn, Speculators, the Fed (can make cheaper Pennies, LOL)... Korea, Japan, India and... CHINA.  Is China still buying or holding  $1.2T in US Debt/Treasuries?

Or are JPM and Citi about to corner this Commodity market also?  Looks like the Prime Dealers are swapping their Chits for Real Assets, like good little Preppers. 

BTW, since so much of it comes from Simon Black's new Home, Chile gets screwed by this. 

Mon, 07/06/2015 - 10:13 | 6276166 Herodotus
Herodotus's picture

Your bugout bag be a mite heavy.

Mon, 07/06/2015 - 12:19 | 6276726 thesonandheir
thesonandheir's picture

If you get a foot long piece of the right electrical cable (talking 3 or 4 cores x 16mm) it can also double as a nice cosh just in case someone needs to be told something they will remember. 

Mon, 07/06/2015 - 09:47 | 6276091 Captain Debtcrash
Captain Debtcrash's picture

You won't hear the MSM call it Dr. Copper now, since its pointing toward a weaker future. 

Mon, 07/06/2015 - 09:39 | 6276046 Osmium
Osmium's picture

How can copper be down when the eCONomy is so robust?

Mon, 07/06/2015 - 09:53 | 6276116 mastersnark
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"I just want to say one word to you. One word. Are you listening? 'Plastics'."

Probably.

Mon, 07/06/2015 - 09:39 | 6276048 Fun Facts
Fun Facts's picture

where are all the fabulously wealthy technicians ?

Mon, 07/06/2015 - 10:49 | 6276290 kaiserhoff
kaiserhoff's picture

Still looking for "support"  from the Broke Back Mountain formation.

Seriously, in 30 years around the business, I have never, ever heard anyone claim to have made serious money through technical analysis.

Mon, 07/06/2015 - 11:31 | 6276511 Two Theives and...
Two Theives and a Liar's picture

+1 Interesting.

To paraphrase Bobby Dylan, " Don't need a [technician] to see which way the wind blows".

Mon, 07/06/2015 - 12:33 | 6276792 InflammatoryResponse
InflammatoryResponse's picture

Years ago when I was on the INVFOR on CI$,

 

there were quite a few people there that made ALL of their money on TA.

 

Mon, 07/06/2015 - 09:39 | 6276049 cowdiddly
cowdiddly's picture

Dr Copper don't lie.

"I hear that train a comin, it's rolling round the bend.

I ain't seen the sunshine, since I don't know when."

The Man in black

Mon, 07/06/2015 - 09:40 | 6276052 Seasmoke
Seasmoke's picture

I don't follow Platinum or Palladium. But has anyone noticed the beatings they have taken in paper price lately !!!

Now does this mean Gold has held up very well and Ready to move higher or is it next in line for the monkey hammer ???

Mon, 07/06/2015 - 09:45 | 6276071 SoilMyselfRotten
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That was my question Sea, With Plat/Pall hammered over 3% today how/why did they not smash gold/silver. Very strange indeed.

Mon, 07/06/2015 - 11:04 | 6276365 Took Red Pill
Took Red Pill's picture

Platinum & Palladium are often used together in industry such as for catalytic converters. Maybe they're along for the ride down with other commodities like oil & copper. Most see gold & silver as a safe haven so with the situation in Greece maybe that's why they haven't gone down as well. Just a guess.

Mon, 07/06/2015 - 11:35 | 6276529 Two Theives and...
Two Theives and a Liar's picture

Correct. They are not monetary metals. Gold and Silver are like compressed springs..getting more compressed faster..Gold,Silver and Bonds will tell us when control is ( someday) lost.

Mon, 07/06/2015 - 12:34 | 6276804 InflammatoryResponse
InflammatoryResponse's picture

yes indeed, Plat/Pall are industrial metals for the most part.

 

not like gold/silver are industrial AND "money".

 

Mon, 07/06/2015 - 09:49 | 6276104 greatbeard
greatbeard's picture

I don't follow any of the metals anymore, it's just easier on my constitution.  Occaisionally I'll take a peek, just did this moring, to see how badly I've been mauled.  I did just happen to take notice of P&P, although gold and silver are the only two I partake in, and noticed they were down substantially.  I didn't know it was a monkey hammering, just figured it had been gradual over weeks. 

My cynicism would leave me to believe all the signs point to a substantial monkey hammering of gold and silver.

Mon, 07/06/2015 - 09:50 | 6276106 Took Red Pill
Took Red Pill's picture

No, not neccesarily.  Gold could go up or down depending what JPM, CITI, & gang want. But you're right about Platinum or Palladium. Traditionally, platinum is higher than gold but hasn't been for some time. Much of the Palladium comes from Russia so perhaps it's being suppressed to hurt them.

Mon, 07/06/2015 - 09:45 | 6276067 ConManipulation
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No worries, it will rise again when emperor nobama declares gold illegal and all "money" be made of copper.

Mon, 07/06/2015 - 09:44 | 6276074 razorthin
razorthin's picture

Don't panic, a triangle usually breaks in the direction of the larger trend, and falling wedges in general uptrends (bull flags) are bullish :)

Mon, 07/06/2015 - 09:45 | 6276079 ThisIsBob
ThisIsBob's picture

If copper ain't happy, ain't nobody happy?

Mon, 07/06/2015 - 09:46 | 6276084 besnook
besnook's picture

and i bet china is stockpiling it as we speak. cheap copper will not save the west. something real has to be made with it and all the west produces are guns and money.

Mon, 07/06/2015 - 12:07 | 6276659 messymerry
messymerry's picture

...and lawyers:

send lawyers, guns, and money, the shit has hit the fan.

;-D

Mon, 07/06/2015 - 12:17 | 6276716 MrSteve
MrSteve's picture

The west produces grain- wheat and corn and soybeans and the critters raised on the grain- hogs, cattle, chickens. The ag markets are something, not nothing.

Mon, 07/06/2015 - 13:56 | 6277160 Not Too Important
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And all that corn and soybeans is GMO, everything is very radioactive, and the animals that eat it are magnifying the concentration - biomagnification.

And, of course, the animals that eat those animals and those grains are biomagnifying at even higher rates. The DNA destruction is well underway.

Bon apetit.

Oh, and about those newborns...

Mon, 07/06/2015 - 09:46 | 6276088 JBilyj
JBilyj's picture

that 1 year chart looks like the 1 year gold chart...is gold about to tank too then?

Mon, 07/06/2015 - 09:48 | 6276099 Wild Theories
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China is a net importer of copper, they'll be more than happy to see its price crash.

 

The countries that actually would want to save copper prices would be the likes of Australia, Peru, Chile... you know, the ones who dig this stuff up for export

Mon, 07/06/2015 - 09:50 | 6276105 cro_maat
cro_maat's picture

This is bad news for the boys in Detroit.

"I'm sorry I can only give you 1 bottle of Old Milwaukee for that copper you stole"

Mon, 07/06/2015 - 09:51 | 6276109 Toolshed
Toolshed's picture

What about all those loans issued in China that were based on big piles of copper, supposedly sitting in a warehouse somewhere, as collateral? Have they all been repaid?

Mon, 07/06/2015 - 09:52 | 6276113 sudzee
sudzee's picture

If JPM and C can't break gold and silver this week with a paper corner its over. I be gettin me the last available right soon.

Mon, 07/06/2015 - 09:53 | 6276114 truthserum
truthserum's picture

Copper has been artificially high for several years now, no doubt somebody has been warehousing the stuff in the foolish ploy of diversification. Google "Hunt brothers" for a good lesson in the folly of people thinking they know better than the market.

Gold is equally overpriced and may well get cut in half.

Mon, 07/06/2015 - 10:04 | 6276143 Fun Facts
Fun Facts's picture

Gold, Silver, Platinum, Palladium and Rhodium are all trading below the marginal cost of production.

The silver mining industry lost 3 billion dollars last year.

Mon, 07/06/2015 - 09:53 | 6276115 BoPeople
BoPeople's picture

The industrial metal that I find interesting is cobalt. It is a byproduct of copper mining and smelting and has been on a tear in the positive direction.

Are they now mining copper just to get the cobalt? That does not sound good for copper.

Mon, 07/06/2015 - 10:00 | 6276133 Fahque Imuhnutjahb
Fahque Imuhnutjahb's picture

Assuming China is the largest consumer of copper, why would they want to underpin or bolster the price?  Aside from attempting to stave off a deflationary domino effect, I see no reason to do so.  If the RMB/yuan

weakens and deflationary pressures strengthen their reserves of Fed. notes and US treasury issuances, then they could perform a little jiu-jitsu manuver and add to the directional momentum.  If and until they begin to

experience societal reverberations, the drop in commodity prices, to me, appear to be a boon for them.  But what the hell do I know Imuhnutjahb.

Mon, 07/06/2015 - 10:02 | 6276136 ebworthen
ebworthen's picture

Dr. Copper:  "The patient is red-lining damnit!  This isn't a cold, it's a heart attack!"

Mon, 07/06/2015 - 10:02 | 6276137 FreedomGuy
FreedomGuy's picture

How much investment today is based on the central planners versus actual market forces? I assert that virtually all of it is. Central bankers, central regulators, IMF, European Union, etc. are all central planners.

What the Fed or ECB says in one line is 1000 times more powerful than what the new iThing is selling and Apple's margins. In fact, it turns the rational investing world upside down. How many times since the last crash have we seen bad or flat economic news become good news? Why? Because we/investors know that interventions will increase or at least ZIRP will not end.

Greece should default. Bonds should be sold off at market clearing prices. Credit default swaps should be executed. Some stupid financial houses should go under (new ones arise) and Greece should get a double F credit rating for at least twenty years. Bad choices get punished. Good choices get rewarded along with the people who made them.

In this world, a rational world, recovery is around the corner and smarter markets that create more prosperity. Unfortunately, this is not the current financial world.

Mon, 07/06/2015 - 10:18 | 6276173 who cares
who cares's picture

Greece should default and go back to their own currency. They wil live as poorly as they would live inside the euro anyway, but they will enjoy seeing the rest of the Europian togheter with the USA go down the drain when their economies will crash due to their unpayable debts. Moreover they will probably escape financing all the silly wars that the USA will continue to start around the world.

Mon, 07/06/2015 - 10:15 | 6276175 who cares
who cares's picture

Greece should default and go back to their own currency. They willlive as poorly as they would live inside the euro anyway, but they will enjoi seeing the rest of the Europian togheter with the USA go down the drain when there debts will be unpayable. Moreover they will probably escape financing all the silly wars that the USA will continue to start around the world.

Mon, 07/06/2015 - 10:09 | 6276152 who cares
who cares's picture

We are already in recession. It is only the specialists in BS of CNBC and Co that are seen goldilock and recovery. They will do it until the market, unexpectably to them, crashes and then they will look as stupid as they did back in 2008. The memory of most investors goes back only two years at most and the majority of the young market analysts that are showing up on BNN and CNBC were still in high school then. They been trained and hired to sell BS.

Mon, 07/06/2015 - 10:20 | 6276196 Element
Element's picture

So what's electrikery doing?

Mon, 07/06/2015 - 10:33 | 6276237 disabledvet
disabledvet's picture

The utilities themselves have been getting HAMMERED.

"Excess product everywhere sloshing around."

Talk about "shortages of fiat." Cash "quotas" in Europa?

These are all signs of a MASSIVE default risk...and I aint talkning to gold. These clowns are all levered to the hilt...all it takes is one "and the entire facade is done."

Mon, 07/06/2015 - 10:39 | 6276254 Quinvarius
Quinvarius's picture

Short copper vs long silver continues to work.

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