If you believe the so-called Doctor Copper theory, the diagnosis for stocks is not good.
Copper futures plunged to a 4½-year low Sunday evening, before staging a bit of a resurgence Monday. But with the industrial metal down 9 percent in the past three months, the "Doctor Copper" theory has become a warning, for some, about where stocks are going.
A time-honored concept in markets, the theory holds that copper is able to sense economic turning points early, and thus measure the health of a stock market rally. This is because copper is a near-omnipresent metal used in homes, in electronics and for many industrial purposes. The idea, then, is that if copper prices are falling, economic activity is slowing down, which is bad news for other financial assets.
"Because copper has so many industrial uses, it's probably a great indicator," said metals guru George Gero of RBC Capital Markets, so falling copper prices should indeed cause concern.
Still, Chris Kimble of Kimble Charting Solutions notes that copper has been falling for years, even as equities have skyrocketed.
"Over the past two or three years, if you followed copper, you would have missed the S&P rally," Kimble pointed out.
Kimble said that copper has thus far managed to hold an important support line that it tested in 2002 and 2009. If it breaks below monthly support, which currently lies at $2.75 per pound, he would become concerned about equities. By early afternoon Monday, March copper futures up 1.8 percent to $2.90.