The health of the price of copper, shown here in cents per pound on the weekly chart, is a guide to the health of the world economy. The weekly copper chart suggests world economic health is beginning to improve but it's too early for a celebration.
The price of copper has a long history of testing, and then retreating away from the upper edge of the long-term group of moving averages in the Guppy Multiple Moving Average (GMMA) indicator.
So what is different this time with the price testing the upper edge of the long-term GMMA?
The first difference is that the long-term downside target price for copper has been achieved. The dominant feature on the chart was the equilateral triangle pattern. The downtrend trend line in the pattern started in September 2011. The uptrend line started October 2011. The height of the pattern is measured at the base. This value is then projected downwards from where price moved below the uptrend line in March 2013.
This gives a downside target of 250 cents and this target was achieved and exceeded. The 250 cents level is now a significant resistance level. A close above this level is very bullish.
The second and most important difference is the behavior of the long-term group of averages on the weekly chart. The long term GMMA became widely separated in December 2015. The recent price rally from 195 cents to 230 cents has caused a significant compression in the long-term GMMA.
The degree of separation remains wide, but the compression behavior is quite strong. This suggests a significant change in the way investors are thinking about future economic growth and the future price of copper