More often than not, the spot worth of copper may be very properly correlated with what inventory costs do. Sometimes, there’s a momentary squeeze within the copper market, leading to a spike high that’s not mirrored in inventory costs, and that’s fairly strange. We noticed a number of such spike tops in 2021, and as soon as extra in early 2022.

A greater indication comes from outdoors of these temporary squeeze occasions, once we see a extra persistent divergence between the 2 plots. We’re seeing such a divergence proper now, with the NYSE Composite Index ($NYA) nonetheless at the next low, however with copper costs pushing downward in a lower-highs, lower-lows sample that defines a downtrend.

More often than not, when these two plots disagree, copper often finally ends up being proper concerning the course during which each find yourself heading. That’s an alarming perception proper now, and it suits with the poor breadth numbers we’re seeing. The NYSE’s A-D Line proven beneath can be making decrease lows, in battle with the upper highs within the S&P 500 and NDX because of the upward pull by Apple (AAPL) and Microsoft (MSFT).

The message of each copper and the A-D Line is that liquidity is tight, and you may thank the Federal Reserve for attaining the aim it has got down to accomplish. They assume that they’ll suppress worth inflation by eradicating liquidity from the banking system by way of larger brief time period charges and “quantitative tightening”, or QT, which means promoting off their bond holdings. Whether or not that may really suppress inflation is a separate query, however there is no such thing as a doubt that it’s hurting monetary market liquidity.