Copper Hits A New High, Consumer Confidence At Four-Year Low, Market Mechanics Control Stock Market

To gain an edge, this is what you need to know today.

Doctor Copper

Please click here for an enlarged chart of copper ETF United States Copper Index Fund CPER.

Note the following:

• Copper is known as Doctor Copper because historically copper has been a good indicator of the global economy.  However, this time it is different because the move in copper is due to President Trump's policies. 
• The chart is a monthly chart to give you a long term perspective.
• The chart shows that copper is hitting a new high.
• The up move over the last month is due to the threat of US tariffs.
• President Trump instructed the Commerce Department to look into copper tariffs on February 25th and produce a report within 270 days.  It appears now that the Commerce Department is ready with the report.
• In our analysis, copper tariffs may come within weeks, much earlier than expected.
• Copper futures on Comex hit a record of $5.37 per pound.
• Copper is important because the demand has been rising due to its use in AI data centers, electric vehicles, and more power production.
• In anticipation of tariffs, copper traders are importing huge amounts of copper into the United States.
• The largest publicly traded copper producer by market cap is Freeport-McMoRan Inc (FCX).  As full disclosure, FCX is in our ZYX Buy Core Model Portfolio. There is another copper position in First Quantum Minerals Ltd FQVLF.  FQVLF is also a buyout target.  Earlier this morning, we gave a new signal on copper producer Taseko Mines Ltd (TGB) due to its Florence Copper Project in Arizona; as of December 2024, the project was 56% complete.  Being in the United States, Florence Copper Project will benefit from tariffs.  The signal was given in our ZYX Buy. 
• Another big use of copper is in housing.  If there is a recession, copper demand from housing will fall.
• Prudent investors should take a global perspective.  China is the biggest consumer of copper.
• Consumer confidence fell to a four year low.  Consumer confidence came in at 92.9 vs 93.5 consensus.  As a reference, consumer confidence was 100.1 in February.  A number below 80 is an indication of a recession. 
• Durable orders data is strong.
  • Durable orders came in at 0.9% vs -1.2% consensus.
  • Durable orders – ex transport came at 0.7% vs 0.1% consensus.
• Market mechanics continue to be in control of the stock market.  Please click here to see the prior Morning Capsule for details.
• As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.   Please scroll down to see the protection band.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Apple Inc (AAPL), Amazon.com, Inc. (AMZN), and Microsoft Corp (MSFT).

In the early trade, money flows are negative in Meta Platforms Inc (META), NVIDIA Corp (NVDA), Alphabet Inc Class C (GOOG), and Tesla Inc (TSLA).

In the early trade, money flows are neutral in SPDR S&P 500 ETF Trust (SPY) and Invesco QQQ Trust Series 1 (QQQ).

Momo Crowd And Smart Money In Stocks

Investors can gain an edge by knowing money flows in SPY and QQQ.  Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil.  The most popular ETF for gold is SPDR Gold Trust (GLD).  The most popular ETF for silver is iShares Silver Trust (SLV).  The most popular ETF for oil is United States Oil ETF (USO).

Oil

Oil inventory data from API came at a draw of 4.6M barrels vs a consensus of a draw of 2.5M barrels.  This data is bullish in the short term and bringing in buying.  However, prudent investors should note that there is a counter balance — the US and Russia have reached a deal on a ceasefire in the Black Sea.  The US is also likely to work to reduce or eliminate sanctions on Russian oil.

As full disclosure, there are signals in oil in inverse oil ETF ProShares UltraShort Bloomberg Crude Oil (SCO) in The Arora Report’s ZYX Buy and oil ETF United States Oil Fund LP (USO) in The Arora Report’s ZYX Short.

Bitcoin

Bitcoin is range bound.

Protection Band And What To Do Now

It is important for investors to look ahead and not in the rearview mirror.  Our proprietary protection band puts all of the data, all of the indicators, all of the news, all of the crosscurrents, all of the models, and all of the analysis in an analytical framework that is easily actionable by investors. 

Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider a protection band consisting of cash or Treasury bills or short-term tactical trades as well as short to medium term hedges and short term hedges. This is a good way to protect yourself and participate in the upside at the same time.

You can determine your protection bands by adding cash to hedges.  The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive.  If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.

A protection band of 0% would be very bullish and would indicate full investment with 0% in cash.  A protection band of 100% would be very bearish and would indicate a need for aggressive protection with cash and hedges or aggressive short selling.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.  When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks.  High beta stocks are the ones that move more than the market.

The Arora Report is known for its accurate calls. The Arora Report correctly called the big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever Generate Wealth Newsletter.