Saturday, 24 January 2015

Copper and Oil remain broadly weak

Whilst equities saw a day of moderate weak chop, there was again notable weakness in many of the commodities. Copper fell a further -5.0% across the week to $2.50, whilst WTIC Oil fell $3.32 (-6.8%), @ $45.59. Neither are offering any sign that a key floor is in.

Copper, monthly

WTIC, monthly'2


So.. the two big commodities of Copper and Oil both saw very significant net weekly declines.

Seen on the bigger monthly cycles, there is even less of a sign of a turn, although both are close/at downside target zones.

Oil remains problematic in that there is ZERO sign of supply being reduced. Even if OPEC agree on cuts at the next meeting in June, it will take a good few months for that to feed through, although Mr Market would likely react very quickly in terms of beginning a new up wave.

Copper is close to the deflationary downside target, but could easily spend a few months in the low $2s... and might not begin a new up cycle until late summer/early autumn.

Low prices... good prices

Of course, for the oil drillers and miners.. low prices are a bad thing. For the rest of the economy though... lower input/energy prices are obviously good. Transports will benefit from lower fuel costs, whilst tech' will benefit via lower metal prices to make components.

It is of course a complex situation. For instance, even though the miners suffer from lower revenue (whether Gold, Silver, or Copper prices)... they are benefiting from lower fuel/energy costs.

Unlike many - not least those at the central banks, I happen to think lower prices are good for the world economy. It is indeed the case that the 'science of economics' is more a philosophical one... than of actual data.

Bonus chart to end the week...

Nasdaq Comp', monthly, 20yr

The Nasdaq' is just 375pts away from challenging the March'2000 bubble high of 5132. Considering the ECB are soon to launch their own QE-pomo for the EU markets, I find it hard to imagine that we won't see the tech' in the 5000s before late spring. Any monthly close in the 5200s should (in my view) be seen as hyper-bullish, with a fair target of 7k by spring 2016.

Goodnight from London

*the weekend post will be on the US weekly indexes