Why This Metal's Rally Is Good for Stocks: Pro
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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.
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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.
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If copper trades above $3.769, it will confirm its bullish bias. I would then expect to see a move up to $3.920.
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