U.S. stocks as measured by the Dow Jones Industrial Average are trading at all-time highs despite a 5% decline the past month in copper prices, which are seen as a leading indicator for the global economy.
Now technical analysts are eyeing a bearish pattern in copper ETFs that could foreshadow further declines.
Some investors say copper isn’t the reliable leading indicator it once was for the global economy, but copper ETFs falling below a key support line has triggered worries about the stock rally. [Copper ETF Decline Negative for Global Economy?]
“Copper is frequently looked upon as an economic leading global indicator. Its track record isn’t flawless, yet major moves is copper often correlate with major moves in the stock market,” according to Kimble Charting Solutions.
Copper prices are also seen as a gauge for the health of the Chinese economy as the country is a big consumer of the commodity. Investors are worried about a potential slowdown in China, the world’s second-largest economy.
“Copper prices have been in retreat for four of the past five weeks, amid concerns that global demand for the metal was slowing just as copper mines around the world were ramping up their production,” Dow Jones Newswires reports.