Doc Copper; Head & Shoulders top completed?

A good deal of talk going around the street since the election last year, has revolved around the “reflation theme!” Below looks at a couple of charts that could be suggesting that the reflation theme could be peaking.

First we take a look at the price pattern Ole “Doc Copper” is creating.

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Copper so far, continues to make a series of lower highs over the past 6-years. Copper hit three year falling resistance at (1) and has backed off in price. While hitting this resistance, Copper has created three different bearish reversal patterns (bearish wicks) and potentially a head & shoulders topping pattern. This week Doc Copper could be putting the finishing touches on the right shoulder at (2).

The key to this pattern now? Can Doc Copper remain above the neckline, just below (2). IF support does not hold here, selling pressure could increase.

Below looks at the Copper/Gold ratio and the yield on the 10-year note.

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If the reflation/growth theme is to continue (be the real deal), Ole Doc Copper, 10-year yields and the Copper/Gold ratio needs to breakout to the upside, not be putting in lower highs and acting weaker.

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Doc Copper; Breaking bearish rising wedge support?

Ole Doc Copper has been creating a series of lower highs and lower lows since 2011. During this time period, stocks did well and many commodities did not. At the same time Doc Copper was soft, global growth had little to brag bout. Also during the decline in Doc Copper, interest rates did the same.

Around the time of the election, Doc Copper broke above a narrowing pennant pattern and buyers stepped in on the breakout, pushing Copper sharply higher.  Below takes a current look at Doc Copper on a weekly basis

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This sharp rally has taken Copper up to test two falling resistance lines, drawn off a series of lower highs at (1). At the same time Copper is testing falling resistance at (1), it also finds itself at the apex of a potential bearish rising wedge pattern. Two-thirds of the time, this pattern suggest lower prices.

The common theme/narrative post election is higher stocks, higher growth, higher inflation and higher interest rates. Currently Copper traders have established a historical crowded trade. If support breaks at (2), this crowded trade would find itself of the wrong side and considerable unwinding could take place.

What ole Doc Copper does at (2), could go a long way to proving, if the post election narrative/theme is still on this path.

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