Copper - Monthly Line on Close

For thirty-five years copper was essentially a range bound commodity that cycled with the various global economic
phases. It’s these sorts of charts that make many commodity traders scoff at the idea of commodities as an “asset
class.” There can be literally decades of zero growth with commodities. Can you imagine being a long term buyer of
copper in the late 60’s/early 70’s? You bought at the absolute lows, but as of the late 90/s early 2000’s you still didn’t
have much to show for it, only 1.25% growth over decades. If you bought at the absolute lows in the late 1960s and still
held some copper at these higher prices, it would represent about 5% growth. Get the point? Commodities are better
“traded” and not held as an “investment.”

l growth rate Commodities get promoted

a 1 .2 5 % annua as an “asset” class here.
ts
represen Awesom
e!
This line 7 a nd 2001. Investors pour hundreds of
1 9 6
between billions into the “relatively”
small commodity markets.

Andy’s Technical Commentary__________________________________________________________________________________________________

 Copper - 9 and 18 year Time Cycle

Many commodities display time cycles in that they tend to bottom with some periodicity. Time cycles should NOT be
used for timing tops! They are much better employed for determining bottoms. One thing that jumps out on the long
term copper chart is the tendency of the market to bottom every nine years. It tends to reach SIGNFICANT lows every
18 years. This probably shouldn’t come as much of surprise as there have been many studies that demonstrate a 16-18
year cycle in real estate prices and copper is an industrial metal that should swing with the various real estate cycles.
The Nine year cycle is pointed down through 2011. The 18-Year cycle is due to bottom in 2020. This is interesting given
the longer term outlook for the S&P 500 (see next page) that was highlighted on 1/23/10. The S&P 500 appears headed
lower through 2011/12 with an ultimate low sometime at the end of this decade. That theory coincides nicely with the
timing cycle of copper.

Andy’s Technical Commentary__________________________________________________________________________________________________

 S&P 500 Weekly (Log Scale)
Supercycle Wave III concludes amid
“euphoria” over stocks.
<B>

(B) Reprinted from 1/23/10

(A)

-X-
<D>
2014/15

<A> 2020?
<E>
2011/2012 IV
-Y-
(C) <C>
-W-
This large Supercycle Wave IV triangle is my preferred model for the next several years. Essentially, it’s going to be a long
slog as the U.S. grapples with credit deflationary forces and the efforts of government/Fed to arrest the deflation. Some time
at the end of this decade, after the Baby Boomers have finally cashed out of the stock market to provide for their own
retirements, it should be a good time to enter the market.

Andy’s Technical Commentary__________________________________________________________________________________________________

 Copper - Monthly Line on Close

Longer term wave counts on commodities are a bit tricky for two important reasons: a) commodities do no exhibit
growing impulsive waves like stocks--rather, they are a series of corrective waves; b) accurate historical data is difficult <A>
and costly to obtain. So, the best we can do is use what we have to make reasonable deductions. What’s clear about
this chart is that “something” major completed in the 2002/2003 time frame. That “something” was a combination of the
China growth story and “commodities as an asset class.” It was a perfect storm for copper. My guess is that the
powerful move that we observed was only an initial wave higher that will now need to be “consolidated/corrected” for the
next several years. I’ve highlighted in red boxes the other instances where there were sharp moves that resulted in large
declines and rebounds, similar to what we’ve seen the last few years. The end result was at least a few more years of
corrective (prices go down) behavior before the next big rally. I’m labeling the 2003 - 2008 advance a Cycle <A> wave.

Beginning of a
decades long move.

Andy’s Technical Commentary__________________________________________________________________________________________________

 <A>
-Y-
Copper - Weekly Log Scale -W- (C)
(C) 4.216

(A) (B)
(B) 3.544

(A)
(B)

(C)
-X-

1.71
(C)

(A)

(B)

1.247
(A)
1.05

or ( C )

The initial <A> wave up was a five year advance. This means that the resulting <B> wave could last 5 to
10 years with lots of sideways/lower whipsaw coming. Because it was so brief, the 2008 nosedive to 1.247
is labeled just an intermediate (A) wave. The decline and subsequent rally lasted around 87 weeks. The
intermediate (C), which looks to be underway now, should last at least 44 weeks and could take as long as
87 weeks. This coincides nicely with the nine year cycle low that is set to occur in the 2011 time period.
Move probably The prime targets for this move would be either 1.71 [61.8% of (A)] or 1.05 [(A) = (C)]
begins here.

Andy’s Technical Commentary__________________________________________________________________________________________________

 (B)
“y”
-5- of c
Copper - Daily Log Scale
-3-

-1-
a -b- -4-
3.00
-d-
-2-

-e-
b
-a- -c-
x
“w”
c -b-
-d-

y
-e- “x”
w
-c-
-a-

a
This was a pretty difficult count to comprehend off the lows. It was made more complicated by the
strange “x” wave in the middle of the pattern, which was one of those unusual “triangle-X-triangle”
corrections that is NOT in any Elliott Wave literature that I’ve read. The final c-wave was a ‘terminal’ five
wave move--the various legs we’re all corrective in nature. The 3.00 level is very important now. It is
both the 23.6% retrace of the entire advance and very clear “chart support.” A decisive break of $3.00
would confirm the bearish implications of this model and would set the stage for a much deeper move to
b at least $1.71. For bears/shorts, the $3.26-3.35 zone should now be stiff resistance for any bounces. A
break of $3.35 would put this bearish model in the trash can.

1.247
(A)

Andy’s Technical Commentary__________________________________________________________________________________________________

 Copper - LME Inventories
We don’t normally bring in silly ideas like “fundamentals” in these technical discussions, because everything you want to know about supply and
demand can be seen in the price chart. For instance, the copper inventories were at very low levels in June 2008, when the copper market was
peaking and were rising rapidly AFTER copper prices was bottomed in Dec ’08. This is why we don’t bother with such things any more.
However, it is noteworthy how strongly inventories have been rising WITH the rising prices. Something will inevitably “give” here…either prices
will plunge or these inventories will plunge. Or, maybe it will be a combination of both?

Andy’s Technical Commentary__________________________________________________________________________________________________

 DISCLAIMER WARNING DISCLAIMER WARNING DISCLAIMER

This report should not be interpreted as investment advice of any kind. This report is technical
commentary only. The author is NOT representing himself as a CTA or CFA or Investment/Trading
Advisor of any kind. This merely reflects the author’s interpretation of technical analysis. The
author may or may not trade in the markets discussed. The author may hold positions opposite of
what may by inferred by this report. The information contained in this commentary is taken from
sources the author believes to be reliable, but it is not guaranteed by the author as to the accuracy
or completeness thereof and is sent to you for information purposes only. Commodity trading
involves risk and is not for everyone.

Here is what the Commodity Futures Trading Commission (CFTC) has said about futures trading:
Trading commodity futures and options is not for everyone. IT IS A VOLATILE, COMPLEX AND
RISKY BUSINESS. Before you invest any money in futures or options contracts, you should
consider your financial experience, goals and financial resources, and know how much you can
afford to lose above and beyond your initial payment to a broker. You should understand commodity
futures and options contracts and your obligations in entering into those contracts. You should
understand your exposure to risk and other aspects of trading by thoroughly reviewing the risk
disclosure documents your broker is required to give you.