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Why Copper's Fall Is Bad for Stocks

Oliver Bunic | Bloomberg | Getty Images

It's a metal whose performance tends to track the S&P 500 — copper. And over the past two weeks it's been falling like lead.

So with stocks soaring, what's the problem?

(Read More: Stocks Lower on China; AAPL at 52-Week Low)

Well, copper futures have been driven down by attempts by the Chinese government to take the air out of an impending real estate bubble. Stricter down payment ratios and higher taxes on speculative property are among several measures that could be implemented.

Now, over the past several years, copper has become the commodity most closely associated with growth in China — so any questions about the Chinese growth story weigh disproportionately on copper in relation to other industrial commodities. This announcement comes at a bad time for copper, as prices had already been declining as part of a broader commodity sell-off.

(Read More: Copper Recovers from 3-Month Low;China Property Curbs Weigh)

The technical picture looks weak as well, after copper recently broke down from a week-long consolidation pattern.

I would be interested in selling copper if the May contract trades back up closer to Monday's highs (around $3.52). I would then adopt a downside objective of around $3.37.

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