Update On Copper

I last looked at copper on December 3, 2008, and I made the following argument: "when I look at a chart of copper and extrapolate this to the global economy, I can safely say that the US is not on the cusp of a new bull market. Any rally should be of the multi week variety and likely sold at resistance levels." But let's take the analysis one step further.

Since our note, copper is down about 6% yet US stocks as measured by gains in the S&P500 are up approximately 4%. Infrastructure plays have been hot as a President Elect Obama touts a stimulus package geared towards rebuilding roads, bridges, schools and public works. Top infrastructure plays, like Fluor Corporation (symbol: FLR) and Foster Wheeler (symbol: FWLT), are up over 25% in 3 days of trading. If infrastructure plays are the new leaders of the "bull market" one would expect confirmation from copper. But this isn't the case. The divergence is noteworthy, and continues to put in question a rally led by past market leaders.

Copper has yet to stabilize. A monthly chart is shown in figure 1.

Figure 1. Copper/ monthly