Is Copper Signaling A Turn In Stocks?

Copper is seen as a leading indicator, and as such, most people pay attention to its direction. Dr. Copper, as it is known, had been getting beaten up relentlessly from April to just about a week or so ago. Lately though, it's been basing a little around the $4 per pound mark, and has started to make a stealth move higher, up another 2.35 cents today to $4.0765 per pound. Take a look at this chart courtesy of FinViz to see what is happening in the good doctor. Copper bottomed on May 12 at around $3.85 per pound, and since then has moved steadily higher to where it is today. If copper had failed at the $4.05 per pound mark, then we could've very well broken lower, as this would be an head & shoulders pattern, but we did not. We moved past the $4.05 level. The next level of resistance is $4.15, and if we can move past that, then it looks like it may be smooth sailing for equities again. If copper is rebounding on increased economic demand, then perhaps what we are seeing in the equity markets is nothing more than a correction on the next leg higher. With the indexes off their lows as copper continues to climb higher, this correlation has never been more prevalent. Traders should watch the iPath Dow Jones-UBS Copper Subindex Total Return ETN JJC for clues, as well as Freeport McMoran Copper & Gold FCX on any clues for the broader markets. If investors believe that copper is likely to go higher, then going long these two names for a trade could be a profitable endeavor.