Slide in copper, anyone? FCX? Or terrible jobs / GDP readings? We’ve got all of those today.
Copper’s decline commenced even before the release of ADP employment and GDP statistics. This is not surprising, as technical indicators often precede fundamental factors. In recent days and weeks, I have consistently emphasized the bearish outlook for copper (and FCX), but this bearish potential has only begun to materialize.
Copper is down by over 6% today, and the U.S. session hasn’t even started yet. The decisive slide back below the 61.8% and 50% retracements sends a clear message:
The top is in.
What’s so special about the current situation is that in light of the link to 2008, this means that the huge decline can now resume. As a reminder, here’s how it looked like back then.
The decline back below the 50% retracement was quick, just as what we see today.
And here’s what happened next.
Carnage.
The same with FCX.
Miners and silver were also hit in a very significant way.
So, it’s no wonder that silver is down today as well.
The decline is not as big as it is in case of copper (“only” 3% so far today), but the important thing is that silver already invalidated its moves above the previous highs (red line), and its 61.8% Fibonacci retracement level (just insignificantly, but still).
Gold is down as well, but overall, it’s still trading sideways after the first part of its decline. Those with gold in their IRAs might not be concerned yet.
It seems that gold and (to some extent) silver are waiting for a more decisive signal from the USD Index.
They are likely to get it, as the USD Index needs just a little more strength to complete its inverse head-and-shoulders pattern with 101.5 as the immediate-term target. The thing is that this rally would confirm a major, medium-term bottom, leading to much bigger rallies.
Copper and silver are not declining alone – they have the support of a declining stock market.
So far, the decline is relatively small (under 2%), but the important detail is that the S&P 500 futures moved back below their declining resistance line as well as the mid-March lows. This invalidation serves as a sell signal, and an indication that the corrective rally is over.
Let’s keep in mind that this is just a small technical confirmation of the storm that has been brewing for some time based on long-term interest rates that are relatively high, the tariff obstacles to world trade, and the overall excessive optimism regarding the stock market.
What we see now is just a tiny confirmation that the corrective upswing (on which we also managed to profit) is over and that “the big slide is starting”.
What is starting? Likely a huge decline that’s not purely technical but connected with severe economic problems.
The market has not been pricing in even a mild recession, and we’re likely looking at significant problems.
The GDP QoQ was just reported at -0.3%.
That’s the first negative reading in years!
The ADP Nonfarm Employment change (62k) was also lower than it’s been in years.
All this while the tariff effects have not yet begun to truly impact the statistics.
Remember when the markets collapsed in 2020? Then the employment numbers collapsed, and people realized that the economic implications are severe and nobody knew how long they would last.
Right now, we see the first crack in the dam when it comes to the employment numbers. The market just got its first reality check. The following economic reports will likely keep adding fuel to the bearish fire.
Please keep in mind that all this comes on top of the very bearish implications of very negative consumer sentiment levels that I discussed yesterday. And in case of the FCX, on top of its very strongly bearish seasonality.
Here’s what’s already happening in the FCX and GDXJ today:
FCX is down by about 7% so far today, so if you added to your short positions when I wrote about that in the last few days, you’re likely very happy with today’s decline.
If you haven’t – don’t worry, the big move lower has likely only begun. The profits on this trade could be even greater than the ones on our previous trade.
Meanwhile, miners are not declining in a visible manner yet.
Just as gold is likely waiting for USD Index’s lead, it seems that the same is going on with the mining stocks. And they are both likely to get it – quite likely soon.
The potential for all our trades is excellent. All this serves as the final call to join the trades – it looks like the decline is about to accelerate and the best part thereof will be gone soon. Naturally, a good entry is only half of the trade, and I’ll keep my subscribers up-to-date regarding taking profits.
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Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief