Oil Divergence From Copper Points To Coming Contraction
December 29, 2011 Leave a comment
The most recent post was a video on how commodities were leading the market lower and how oil had remained buoyant considering the volatility in the overall equity market.
Charted below is a divergence between the price of copper and the price of oil. Oil may be getting close to an area that will put pressure on both the consumer and the producer should copper prices remain weak.
Oil began diverging from copper at the beginning of October when all markets made a YTD low. It took oil just 3 weeks to eclipse the September highs while copper lagged both commodities and equities. At the end of the month, oil made another thrust higher that lasted throughout November. That month, copper was down 2%.
For the month of December, oil is flat and copper is slightly lower though copper is in a much weaker technical position and like the economy, copper is directly vulnerable to headwinds such further elevation of oil prices.