High Grade Copper Continuous Contract (HG.F) &  S&P 500 Index (SPX.I)

In this week’s issue of Equity Leaders Weekly, we look at the recent strength of Copper and the breadth of the U.S. Equity markets with the S&P 500 Index.

As the Pfizer vaccine is starting to be rolled out in North America this week and the FDA expected to make a US decision on Moderna’s vaccine later this week, investors appear to be looking over the shadows of near-term lockdowns to the light ahead. Some of the political uncertainties that impacted sentiment last week also appear to be easing. The Electoral College vote earlier this week confirmed Joe Biden as the next President of the United States and any political uncertainty has now shifted to the final Senate runoff race in Georgia that will drag into 2021 where early voting has started this week in record numbers. US politicians have focused back on spending and the stimulus packages with deadlines this Friday to avoid a government shutdown to prevent any stimulus programs from expiring. Meanwhile in Europe, the UK and EU have agreed to extend talks on a new trade deal to replace the arrangements currently set to expire on Dec 31. With this last full trading week of 2020, many are ready to put 2020 behind them with the two-week holiday slowdown upcoming, but 2021 will bring its own set of new challenges.

Copper is used by a variety of industries with many applications and is widely considered to be a commodity most sensitive to the world economy. In recent years, Copper has been particularly sensitive to changes in sentiment toward the Chinese economy with China having a significant component of copper demand in its growth phase. Copper has had a very strong recovery from its April lows and is up around 38% over the last 6 months. Copper has moved above prior resistance above the $3.35 level, which is now its first level of support and moving to a new 5 year high. We now see resistance above at $3.62. If it breaks above this level and continues its uptrend, next resistance is at $4.00, the high from 2012. Further support to the downside can be found at $3.09. With an SMAX of 7 out of 10, HG.F is showing near term strength against most asset classes. With some heavy resistance levels just above current price it will be interesting to see if copper can add to its bullish run that was started back in April. Strength continues to show progress for this economic activity Barometer so we will be watching this one closely

The S&P 500 Index (SPX.I) has a staged a strong recovery this year so far and has recently moved to new all-time highs. The Index is up around 14.5% so far YTD and is currently in a strong Triple Top point and figure breakout pattern. Resistance now sits above at 3,820 with further resistance in the 4,054 area. Support for the S&P 500 Index is found above 3,392 and further support in the 3196 area. The highlighted green area on the chart shows the potential upside (~10%) to the 2nd resistance level mentioned around 4,054 while the red area shows the downside of the index if there is a pull-back to the first resistance level.

The U.S. Equity markets continue to be a leader and additional breath seen in the market recently serves to strengthen it further. The Russell 2000 Index is up around 18.5% YTD while the Nasdaq Composite Index has been leading the charge up around 28% over the last 6 months and around 41% YTD. With an SMAX score of 7 out of 10, the SPX.I is showing near-term strength against other asset classes.