Bloomberg Copper, which dropped from a May 5 high of 2.95 down to an Aug. 24 low of 2.20, has since climbed about 11% to 2.44 in the nearby futures contract Having traversed from the top of its downward-sloping channel to the bottom before bouncing, copper could be in the midst of a significant upside reversal that is destined to test the upper channel boundary, now at 2.90.
Interestingly, copper prices have been climbing during the exact same timeframe that 10-year yield has climbed from 1.90% to 2.24%. This is an unusually positive correlation, as, traditionally, rising interest rates dampen interest (and increase carrying and storage costs) of commodities, in general, and copper, in particular.
Nonetheless, this "new relationship" could be indicating that the Fed is intent on a one-and-done rate-hike scenario that will not negatively impact an oversold rebound in copper and/or that the U.S. and global economies are on the verge of a burst of strength that few expect.
As an example of copper’s strength, Freeport-McMoRan is up 39% since its low close on Aug. 26. That was the day prior to news that Carl Icahn has taken a near 8.5% long position in the stock. What is interesting, if not purely coincidental, is that Icahn announced (acquired?) his stake right after FCX pierced the lower boundary line of its 2011-2015 down channel.
So far, the "Icahn influence" has helped FCX recover to the extension of the lower boundary line, in the vicinity of 11.20.
To really get some upside traction, FCX must hurdle and sustain above 12.20/12.50, which will point to upside potential into the 18.00-20.00 target zone in the weeks or months thereafter.
From a macro markets perspective, I can make the case that copper and oil prices hit significant lows at the end of August, and that the significant up-moves have since initiated multi-month recovery rally efforts that will reduce headwinds and encourage demand for FCX.
See charts illustrating the technical patterns of copper and FCX.
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