GO
Loading...

Why This Metal's Rally Is Good for Stocks: Pro

Wednesday, 13 Feb 2013 | 12:10 PM ET
Macduff Everton | Image Bank | Getty Images

A rally in copper futures will help push the stock market higher.

If you look at a chart of copper futures compared to the S&P 500 index, it is immediately evident that there is a strong longer-term comparison between these assets. Actually, that makes perfect sense, as both copper and equities are considered "risk-on" assets.

However, over shorter time periods, we may see sharp divergences that can be explained by copper's pronounced link to the Chinese economy.

(Read More: CNBC Explains 'Economy')

Indeed, over the last week, there has been a significant divergence, as equities have outperformed copper despite strong Chinese economic data that should normally be good for copper. I would expect price convergence to happen soon, and I believe it will be driven by rising copper prices, as opposed to a drop in equities.

(Related: China's Smog Becoming Neighbors' Problem)

If copper trades above $3.769, it will confirm its bullish bias. I would then expect to see a move up to $3.920.

Watch "Futures Now" Tuesdays & Thursdays 1p ET exclusively on FuturesNow.CNBC.com!

Like us on Facebook! Facebook.com/CNBCFuturesNow

Follow us on Twitter!@CNBCFuturesNow

Contact Futures Now

  • Showtimes

    Watch Futures Now Tuesdays & Thursdays 1p ET exclusively on cnbc.com!

Sponsor Links

  • CME Group brings buyers and sellers together through its CME Globex electronic trading platform and trading facilities in New York and Chicago.

  • Take your trading to the next level with a platform that lets you trade stocks, options, futures and forex all in one place with no platform or data with no trade minimums. Open an account with TD Ameritrade and get up to $600 cash.