Copper Has Hit The Low Point In Its Cycle-Higher Prices Are Coming

Products You May Like

In a May 21 posting, the case was presented for a copper price low in July. The conclusion was, “Thus, the seasonal, monthly and the weekly cycles point to early July as the next significant low. At that time, price will likely be in the $2.65-$2.85 area. The July rally will likely carry price close to the $3.00 area.” Price hit $2.62 on July 9th and closed at $2.74 on Friday.

Let me review the case and update the projection. Based upon daily data from 1890, here is a monthly histogram of the expected return. Note that the first quarter has traditionally strong followed by a weak quarter two. July has been the strongest month in the last three quarters of any year. Since 1890, 59.2% of all Julys have been up for an average 1.1% gain.

Chart 1: Monthly Copper Price Histogram

This is a static cycle in that it does not change very much. In order to have a complete picture, we run the dynamic cycles monthly. This is the same projection that was presented in May.

Chart 2: Monthly Copper Cycle

Below, we see the copper closing low on July 9th. Sentiment has changed in the form of hedgers, the usually correct smart money, raising their long holdings to a multi-year high.

Chart 3-Daily Copper

Here is the updated monthly cycle projection. Note the early September high that matches the seasonally weak September that we see in Chart 1. This increases the likelihood of a weak September. The cycle then points to an early October low followed by a rally to mid-month, another decline followed by a November rally. This cycle projection is reinforced by the seasonally strong November in the monthly histogram. Copper is likely to reach $3 and higher.

Chart 4-Copper Cycle