Market Overview

Negative Divergence That Should Worry Investors


As the Dow Jones Industrial Average makes new all time highs, investors and fund managers are charging into the market, afraid of missing the boat. News flash: The boat left in March 2009. While the emotional response is to rush in, a wiser path would be to wait until a major negative divergence subsides.

This negative divergence is copper. As the markets have been pushing higher, copper has collapsed, falling from a recent high of $47.80 in late January on the iPath Dow Jones UBS Copper Total Return Sub-Index ETN (NYSEARCA:JJC). The low today was $43.64. Copper is a major building block of global growth. If the price is collapsing, something may be wrong. Another major concern on the copper chart is the massive head and shoulder pattern that stretches back to 2009. Head and shoulder patterns are bearish and if it triggers, the price target of copper would be back at the 2009 lows. Scary.

If you are an investor that is feeling the emotion, wanting to chase the markets? Remember what happened when you bought in 2007 at the highs. There were warning signs there as well. My short term projections on the market are for further upside, seeing the S&P 500 make a new all time higher. After that, be careful.

Gareth Soloway


The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Technicals Markets Trading Ideas


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