By Nicholas Santiago on June 3rd, 2010 12:57pm Eastern Time
As we all know, the major market indexes have held the February 5th, 2010 pivot low. The market tested that low on May 25th and have rallied higher ever since. The talking heads in the media have all turned bullish and many are expecting new highs for the year. It is understandable why they would think that way as there are exceptionally low interest rates and tons of money creation. However, the action in copper is painting a different picture that is not so rosy.
Freeport McMoRan Copper & Gold Inc (NYSE:FCX) is the leading copper stock and used by many traders as a commodity barometer. This stock topped out in January 2010 at $90.55 and has never tested that high since. The stock is now trading at $65.24, which is more than a 25 percent decline from that high. Today FCX is trading down $3.83 to $65.22, declining again on the session.
Another leading copper stock that is dropping today is Southern Copper Corp (NYSE:SCCO). This stock topped out in January at $37.00 and is now trading at $28.35. This more confirms that the weakness in copper is not Freeport McMoRan specific. It is in the commodity itself.
It is well know by many traders and investors that when copper falls the stock market should not be far behind and will also decline. The late legendary trader Jesse Livermore said that copper was the leading indicator in the market. This old market adage still holds true to this very day as copper is the most important industrial metal used for electrical wiring and plumbing. Copper is not looking healthy these days and it could be speaking to us.
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