Technically Speaking

Outside Markets Pointing to Increased World Growth

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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In spite of concerns of slowing world growth late in 2018, commercials (blue histogram) showed appreciation and support for copper's lower prices, helping to turn the recent trend higher. (DTN ProphetX chart)

Copper: March copper closed up 15.3 cents last week, ending at $2.9515 a pound, the highest close in seven months. Technically speaking, this has been an interesting turnaround for a commodity that is known for its close ties to world economic growth and China, in particular. As the Dow Jones Industrials were selling off in December with concerns about slower world growth, copper prices were also under pressure and fell to their lowest spot price in over a year on the second trading session in January. However, commercials took advantage of the market's fears and went net long at the lower prices. Now, less than two months later, March copper is over 40 cents higher, helped by news that the U.S. and China may be getting close to an actual trade agreement.

Crude oil: April crude oil closed $1.28 higher last week, ending at $57.26 a barrel on Friday, its highest price in three months. Like copper, crude oil got knocked down to $43.00 in December, its lowest spot price in over a year, partly due to concerns about slowing world growth, but also due to high rates of production. Commercials rarely go net long in crude oil, but managed futures funds were heavily net short, some 78,117 contracts at the end of 2018 -- a potentially bullish mistake at such cheap prices. Now, April crude is up $14.26 from its low on Christmas eve and is encountering possible resistance from both the 100-day average and its three-month high near Friday's price.

Shanghai Composite Index: The Shanghai Composite Index of Chinese stock prices pushed up over 121 points the past week to close Friday at 2,804.23, its highest level in over four months. That is nearly a 15% gain since its low of January 4 and is well above both the 100-day average and its three-month high. Like the two commodities above, Chinese stocks have gone from bearishly fearful in late December to more hopeful now that it looks like the U.S. and China are getting close to a trade deal. On Wednesday, the Federal Reserve's minutes from their January meeting explained how officials are willing to be patient when considering the next rate hike. Combined with the three charts above, markets appear to be showing an increase in the broad outlook for world economic growth in 2019.

Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of commodities or commodity futures involves substantial risk and are not suitable for everyone.

Todd Hultman can be reached at Todd.Hultman@dtn.com

Follow him on Twitter @ToddHultman

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