Cejay KimSeptember 16, 2015 Category: Research
Who is Dr. Copper? He is believed to have a PhD in advanced economics because of his almost supernatural ability of predicting inflection points in the economy. He is looked at as a leading indicator because of his widespread application across industries; when copper prices decline there is a slowdown in growth and when prices increase there is a strong demand and thus, growing economies.
Recently, there have been calls from industry insiders that the bottom for copper is in and the trend is clearly reversed. Just last month, activist investor Carl Icahn made an announcement that he had bought up roughly 8.5% of Freeport-McMoran, one of the largest copper producers in the world. Icahn's announcement along with copper's recent pop has renewed interest in the space. Freeport-McMoran has become on the most popular stocks on the NYSE.
In order to see if a reversal is in place, we charted the S&P against the Copper ETF. Results are above and we think it's too early to tell for certain. However, with copper prices as depressed as they are, Icahn's move to enter the space represents a true contrarian play.