Based on an encouraging global economic growth picture, the copper futures price has been in a rising trend since May and is presently less than 3% from setting a 2-year high. I anticipate resistance at that level, which ought to cause a short-term pullback that would give us the opportunity to buy into weakness. Major gains are then expected in the Copperminers as well as the Oilers after that as my current neutral/positive posture would then become positive.
Goldminers, which are typically highly correlated to Copperminers must show me a significant trend reversal based on various analytics I have pointed out here in the past few days. USD/JPY is weak and there has been a small bump in the Precious Metal futures and Miners; however, I remain cautious. My current posture on the Goldminers has turned from neutral/negative to neutral. After a successful test of the short-term cycle lows in the Gold futures, I will likely be shifting to a neutral/positive stance soon afterward.
But, for me, the focus now should be on Copper and Oil and the pending two-year resistance level for Copper.
Yesterday, the American Petroleum Institute (API) of the US Oil Industry reported an estimated weekly draw of -8.133 million barrels, which is a significant number and ought to be bullish for Oil prices. This morning at 10:30am ET, the US government Energy Information Administration (EIA) will report their estimated inventory data. The EIA report includes the US Crude Oil Imports Data, which is another figure to focus on.
Currently the August 2017 WTI future is priced at 45.74, which is close to the price immediately following yesterday’s API data release. A week ago EIA reported a draw of -6.299 million barrels. Should the EIA inventory number today confirm the API survey data, I would anticipate a price spike.
What I see happening is a brief churning of cycle bottoming action in the Oilers until a clear picture of the Crude Oil price develops, which I believe will be a bullish one. As opined recently, I believe an oil shortage, not glut, is developing and the $WTI will rise to the 65-75 level before year end. At the same time, I think we’ll see Copper futures priced in the 2.90-3.00 range.
Neither of these price levels, nor the anticipated rise in central bank rates in the world, would be sufficient on their own to cause an economic crisis or equity market sell-off. To the contrary, the bigger picture is actually normalizing and should not be feared.