experiment

Copper Contango Theory: Copper Bottoming Out?

Posted by

3

It looks like the contango is steepening again, so that means that the price will likely go down. But the red chart seems to be topping out while the copper price seems to bottom out…

Chart 1: Copper Contango Vs. Copper Price

The COT report though is very bullish, so copper could go up in the future.

Chart 2: COT report Copper

Although the technicals are bullish, the fundamentals are very bearish. First we have the Chinese GDP below estimates. We have IMF GDP growth revisions to the downside. Record stock levels for copper. Stock markets on the verge of collapse.

We have a lot of contradictory indicators.

Update: Copper Contango Experiment

Posted by

9

Copper just made an all time 3 month high at $3.72/lb since late September 2012. It went up 6% in just one day on positive PMI from the UK, Korea, China, Taiwan and India. All of the PMI’s are above 50 which indicates expansion in GDP growth. Meanwhile, U.S. bonds fell off a cliff to 1.84% yield on the 10 year treasuries. It’s not long now before we will see an increase in the velocity of money and come into an inflationary period.

The rise in copper price also proves that the contango theory is valid.

But rest assured, there is much more to come in the following months as today’s contango report for copper indicates that contango is still very high and hasn’t dropped yet to backwardation, so I expect a further increase in the copper price.

Biggest drop in U.S. bonds in 2 months

Posted by

0

A little update on the decoupling experiment I started 2 months ago. I wanted to see if the S&P could decline together with a decline in U.S. bonds and the U.S. dollar. This would mean each graph (red, green, blue) on chart 1 would go down. It hasn’t started doing that yet.

What I did want to take note of is the big decline in U.S. bonds (green graph). On Friday 3 August, 10 year U.S. bond yields spiked to a 1.563% yield. This is almost a 10 basispoints rise in yield. Probably people are worried about the massive U.S. debt, which went to a record 15.933 trillion dollars from 14.8 trillion dollars a few weeks earlier.
The debt ceiling of 16.3 trillion (to be heightened to 16.7 trillion) is near. I predict this debt will go up even faster because no QE3 has been implemented, which means yields will go up and as a consequence interest payments on debt will go up as well.

Chart 1: Monitoring of decoubling USD vs. bonds vs. stocks