Whether this is pre-FOMC jitters or something else we will soon find out, but the action in copper recently and especially so far this morning is not sending such a reflationary signal. Copper staged a decent rally after hitting a low of under $2.5/lbs in late January, but that rally has been handily rejected by the long-term resistance (the yellow dashed line in the charts below). As of this writing copper is down another 2.5% today and if we were to guess it has its sights set on the January low as a starting target. The price of copper has fallen by almost 50% since 2011 in a slow, but steady grind.
Besides being an important indicator of economic activity, the price of copper is for many structural reasons highly correlated with EM stocks. The first chart below shows the copper price (blue line) and the MSCI EM Index in USD (yellow line). More weakness in copper is just what EM stocks don't need right now.
In charts two and three we show a 7-year chart and a 1-year chart of the copper price.
