Leading Indicator Faces Dual Kiss of Resistance

05/25/2015 7:00 am EST

Focus: CURRENCIES

Chris Kimble, of Kimble Charting Solutions, takes a technical look at what is oft-looked at as a leading indicator—Doc Copper—over a 90-day basis and suggests that a dual kiss—with the Shanghai index—is taking place on the underside of the resistance level and he shares his thoughts on what the next move could suggest moving forward.

Often looked at as a leading indicator, Doc Copper has been hot of late. Over the past 90-days, Copper ranks third from a performance perspective (see table below). On a longer-term basis, ole Doc Copper doesn’t have much to brag about.

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For the past few years, Copper has been weak, losing over a third of its value. Earlier this year, the decline in Copper took it below support line (1) that had been in place for over ten years. Now a key kiss is taking place on the underside of this resistance line.

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This monthly chart reflects that Copper’s rally of late now has it kissing the underside of dual resistance at (2) above. If Doc Copper does happen to be a leading indicator for global growth or activity, what it does at (2) could be very important. Has the rally in Copper been influenced by a rally in stock markets in China?

China represents one-sixth of the world’s population and its stock market (Shanghai Index) has done rather well this year and is up 100% since last July. The rally has taken it up to a key Fibonacci resistance level.

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Is it possible that what Doc Copper does at (2) and the Shanghai index does at the Fibonacci 61% level could tell us a good deal about global growth or lack of? How each of these handle resistance could tell us a good deal in regards to the inflation/deflation battle that continues to be in question.

Bonds have been hit hard of late, heading in the exact opposite direction as Copper. If Copper would fail to break above dual resistance, I humbly suspect bond investors would react to it in a positive way.

By Chris Kimble, Founder, Kimble Charting Solutions

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