'Dr. Copper' Has Raised Doubts About Recovery

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Both the stock market rally and economic recovery are missing what historically has been a key element - a house call from "Dr. Copper."

The industrial metal has earned its nickname for being a reliable barometer on growth and, in turn, a sign to investors that it's safe to buy the types of industrial stocks normally associated with a robust market.

But copper has dipped 5 percent just in the past month and is down 10 percent over the year, suggesting that either the market rally and hopes for future growth may be too high, or that the "doctor" may be guilty of malpractice.

"You want to have confirmation, particularly on a macro scale, for (gross domestic product) globally," said Quincy Krosby, chief market strategist at Prudential Annuities. "Very often you'll see the industrial metals start to move before money goes into the industrial sectors and subsectors."

Industrial stocks, though, are on fine footing, as is the broader market, despite copper's weakness.

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The Standard & Poor's large-cap industrial stocks have slightly outpaced the broader index in 2013, rising 10.2 percent compared to 9 percent for the S&P 500 index.

The question remains, then, why copper has not only failed to lead the market move higher but also not kept pace.

The answer, most metal-watchers say, is in China, which now uses about 40 percent of the world's copper.

"Dr. Copper has not handed back his PhD in economics," said Michael Pento, president of Pento Portfolio Strategies. "Copper is stating firmly that base metal inventories and production capacities outstrip global demand. China's government is trying to dictate economic growth rates by creating a huge bubble in fixed assets, and it will fail."

That's a potential bad sign for the U.S. economy given its dependency on China.

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U.S. GDP growth for the most recent quarter was just 0.1 percent, but economists are looking for at least a 2 percent pace through the rest of the year, a goal that will be more difficult to attain if China drops off.

"Housing is doing a bit better and the markets are higher so it's not a disaster for the consumer or the economy, yet," Pento said. "But copper is clearly stating that a booming economy isn't around the corner."

Still, stock market investors seem willing to look past copper and other underlying weak economic signals and keep pushing the major averages higher.

"Perhaps Dr. Copper's field is simply more specialized than before," Julian Jessop, chief global economist at Capital Economics, said in a note to clients. " We would therefore be wary of reading too much into movements in commodity prices without a clear understanding of what is driving them."

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Goldman Sachs issued an analysis Monday that labeled as "excessive" the China-related copper price drop and projected the metal to rise 17 percent over the next six months.

The firm's commodities team based its foreacst on belief that "Chinese metals demand will rise...on the back of continued growth in construction completions from the previous construction boom, property sales and power infrastructure-related demand."

Copper rose more than 1 percent in Tuesday trading, in part on weakness in the dollar that usually results in higher commodity prices. The dollar's trajectory this year, though, has been higher, which likely would pressure commodities.

(Read More: Strong Dollar Is Flashing a Warning Sign for Stocks)

China bears such as hedge fund manager Jim Chanos worry that "ghost cities" built around the country - and featured on "60 Minutes" - have inflated demand and eventually will serve as a major drag on the economy.

In the trading pits, the copper signs also are worrisome.

"We should be trading a lot lower on this base metal now and we haven't been," said Michael Gurka, managing director at Spectrum Asset Management in Chicago. "The fundamentals are China and the U.S. and this whole deluge of slowdown...If we see some dollar strength, then I'm really going to start watching copper."

—By CNBC's Jeff Cox. Follow him on Twitter at @JeffCoxCNBCcom.