Dr Copper - the deflationary outlook

Copper is something I forget to keep an eye on (I'm usually more focused on what Gold or Silver are doing!), but I was reminded of it just last evening.

The big question out remains whether a secondary deflationary wave will hit the world economy this year and into 2013. I sure can't guess yet, but we'll likely find out in the few months.

For the deflationists out there...this would be the outlook...


Copper, weekly, 8yr

Summary

A move down to the primary target zone would probably equate to sp'1100. The secondary level would probably mean at least sp'800...possibly an all out test of sp'666 - but not until 2013.

Its something to at least briefly ponder over.

Good wishes for Thursday trading.

Mid term outlook - Sp'1100

To close today, lets take a look at the weekly cycle chart of the sp'500 index.


sp', weekly, 2yr

Summary

The last 4 trading weeks have been a real choppy mess. We've seen what was probably wave'1 conclude - as discerned via the daily chart, and we're now in the middle of what is surely the corrective wave'2 UP.

The levels are clear, a break under the recent 1266 low will open up a fast move to the 1150 area. That might actually be the floor for wave'3 - with a minor '4 bounce, and then 5' finally hitting 1125/00 in August.

Anyway, first things first....first we need to complete this wave'2...rollover..and break 1266. Things get easier once that is achieved.

One final issue for the bears...will the market break 1100..and take out the 2011 low of 1074? If we do, then a secondary deflationary collapse wave really will be the scenario we face.


A closing thought for the bulls

For those of the bullish mindset..you sure do have a real challenge ahead this summer. I can't imagine this market breaking above 1400 - even if the Fed announces QE-twist to be extended. Only a full blown QE3 would ramp the market up for consecutive weeks, and hell, NO WAY can the Bernanke initiate QE3 whilst the markets are at these lofty levels.

No...this market is heading down. The only issue for next week will be trying to get the best possible short-entry.

Goodnight from London

Daily Index Cycles - bull flag (probably)

With Wednesday showing some choppy and bearish closing action, things are a little more uncertain. However the key levels are clear.

First resistance is the recent low of 1306. The daily 10MA of 1305 will also be strong support on any early Thursday declines - if we get them. In contrast, the bulls need to see a break over 1335 to confirm wave'C is underway - and break/close above the bull flag.

However, lets be clear, if we do somehow slip into the 1280s..this could get fast and dirty real quick - not least due to the Greek elections this weekend.


IWM, bearish outlook

SP' daily, 4month

Summary

Both the hourly and daily charts do display possible inverse H/S formations (not labelled), as well as a bullish flag - as comprised of the last 5 trading days.

From a MACD (blue bar histogram) cycle perspective, we are VERY high on the cycle, so the bears can claim we are due for a pullback. Although I'd consider these past few days of sideways chop, the pullback/consolidation that they have been looking for.
--

Primary target remains sp'1350/60 for the peak of wave'2.

With the market facing more choppy action due to Quadruple witching this Friday, it now appears that wave'C of 2' - if that's what we have, will not be complete until the middle of next week - when the Federal Reserve is due to announce its latest action (or lack of).

So, an interesting day, I remain on the sidelines, waiting for wave'C to complete before shorting this nasty market.

A little more later...