Dr. Copper, “Wait Don’t Sell Equities!”

The Broad Equity Index ETF’s are starting to make traders and investors nervous. The Relative Strength Index (RSI) on the the $SPY, $IWM and $QQQ are all over 70, technically overbought, with the $QQQ at 82! It has not been at these levels in over a year. Cause for alarm? Maybe. It should correct before any major new commitment is made, but that correction can happen through a price pullback, time or a combination of the two. Are we due for a pullback or just a shift sideways? Well Dr. Copper has something to say about it. You may remember that he had been Taking a Power Nap a couple of weeks back, but he woke up Thursday. Take a look.

After a 2 week nap Copper, $HG_F, broke above resistance at 3.91 Thursday and back above the Fibonacci retracement. It is back testing that area Friday morning but holding so far. A look at the Simple Moving Averages (SMA) shows that the 20 day SMA is pushing up through the 200 day SMA, leading the 50 day SMA higher towards a Golden Cross. The next stop is 4.05 and then 4.20. Volume has been picking up as well, an indication of strength. The RSI is bullish and rising and the Moving Average Convergence Divergence (MACD) indicator is refusing to turn negative. Full steam ahead! Oh, yeah, but what does this have to do with the Equities markets? Copper is thought by many to be a leading to coincident indicator of market activity. So Dr. Copper awaking from her slumber is a signal that the markets will head higher, just as everyone is getting scared. Have you ever heard of the Wall of Worry?

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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