When it comes to financial markets, equity prices tend to progress like the Boston marathon: Steady and straight in either direction. Commodity prices, on the other hand, often resemble the 30-yard dash: short, sharp, and sudden. The ultimate aim is to catch the rapid moves in their early stages, not their ending ones.
For achieving that goal, fundamental analysis is about as helpful as a hairbrush in a wind tunnel.
Take, for instance, the Copper market. The most newsworthy event in this metal's recent past occurred on April 16. On that day, the red metal took step one DOWN in a precipitous sell-off to a one-month low in late April.
As for what caused the metal's decline -- the fundamental explanations fell into two main categories: Inaccurate and inconsistent. Here, the following news items from the time say plenty:
Inaccurate: "Copper futures fall on US dollar gains." (AP) To wit: A drop in the greenback increases the appeal of metals. If that were true, then how does one explain the fact that copper prices have been on a tear since the start of the year. Yet -- from January 2009 to March 2009, the U.S. dollar enjoyed a steady winning streak to one-year highs.
AND, inconsistent: "Copper futures fall on worries that demand from China may slow." (Reuters) -- VERSUS -- "China's Copper Demand Stays Up." (Wall Street Journal)
No matter how it's spun, most fundamental analysis is an effort to explain price action that has already long since been underway. As for catching the better part of Copper's recent fall -- beforehand -- one service stands alone: The April 17 Daily Futures Junctures "Weekly Wrap-up." In that publication, long-time editor and Elliot Wave International's chief commodity expert Jeffrey Kennedy presented the following close-up of Copper: (Some labels have been removed for this publication)
The A-B-C wave structure that you see is a classic, single zigzag: A simple A-B-C pattern in which the top of wave B is noticeably lower than the start of wave A, and the subwave sequence is 5-3-5. Below is an ideal model of the zigzag pattern.
Find out whether the red metal's, red-hot winning streak is set to continue. Get the complete May 8
Daily Futures Junctures "Weekly Wrap-up" via a risk-free subscription to
Futures Junctures Service. Click
HERE to begin.