Copper Continuous Contact (HG.F) & iShares MSCI Japan ETF (EWJ) 

Stock markets have been pretty up and down since Friday. In the U.S., the S&P 500 and NASDAQ have been all over the place, with tech stocks performing inconsistently and the Dow Jones lagging due to weak industrials and energy sectors. Over in Europe, things were mostly positive. The FTSE 100 got a boost from some good economic news, while the DAX struggled with concerns about China’s economy. The CAC 40 stayed steady. In Asia, Japan’s Nikkei 225 did well thanks to strong earnings from big exporters, but the recent interest rate hike by the Bank of Japan is putting pressure on the carry trade, which had benefited from Japan’s low rates sending their equity markets into a flash crash scenario with a massive spike in volatility.

This change is impacting global currencies and is having an effect on investment flows of capital. Meanwhile in China, Hong Kong’s Hang Seng faced challenges from ongoing geopolitical tensions and the Shanghai Composite dropped due to worries about state economic policies. Investors are trying to stay optimistic, driven by positive earnings and economic reports but still cautious about global growth and rising geopolitical issues. Central bank decisions and interest rate signals are still key in shaping market momentum. Upcoming reports on inflation, jobs, and consumer spending, along with ongoing corporate earnings and global 'events', will be crucial in setting market direction. Overall, markets are juggling optimism and uncertainty, focusing on key economic and corporate signals. In this week’s Equity Leaders Weekly, we’ll dive into what copper prices reveal about the global economy and take a chartist review of damage caused in Japan's stock market woes.

Copper has widespread applications in many areas of the economy, so it is often viewed as an indicator of economic health. Copper (HG.F) can also be seen in the markets as the most sensitive to swings in the global economy. In recent years, due to its high demand for resources, business conditions in China have become a significant driver of copper demand. But with recent concerns of the US economy slowing and the continued concerns of the health of the Chinese economy, lets review the Point and Figure chart of the High-Grade Copper Continuous Contact (HG.F) at a 1% scale to see how the near term outlook shapes up.In looking at the chart, we see a breakout in the price of copper when the chart broke above a long-term resistance point at $4.96 and hit a ceiling at $5.06 back in May. Since that time, the rally halted, and a rather sizeable pullback has materialized starting in June. A new pattern of lower highs and lower lows has surfaced with the price already breaking below prior support levels of $4.45 and $4.32. Copper has already retraced most of its move since the beginning of the year. It is quickly approaching the next area of support which can be found at the long-term uptrend line of $3.91 to $3.95 area and below that, $3.72. To the upside, any resistance can first be found at the 3-box reversal point of $4.19 and, above that, $4.27.

With a SMAX score (which is a near-term 1 to 90-day indicator comparing an asset against different equal-weight asset classes) of 5 out of 10, HG.F is currently showing very little short-term strength against the major asset classes.

In light of the 3-day global selloff we experienced last week and into this past Monday where the Japanese Nikkei exchange lost more than 12.0% alone on Monday signifying the largest one day drop in the exchange in 37 years, we are going to analyze the Japanese Market by looking at the iShares MSCI Japan ETF (EWJ) which looks at an index of large and mid sized companies in Japan.The Bank of Japan unexpectedly raised interest rates last week but in light of the recent selloff moved to reassure the markets by indicating that further rate hikes will not occur if the markets are unstable signalling a somewhat dovish shift from last weeks initial rate hike decision which may provide support the near term price action may just be a correction as opposed to a change in longer term sentiment. However, only time will tell.In looking at the attached point and figure chart on a 1% scale giving us a more short-term outlook for the shares, we see the iShares MSCI Japan ETF (EWJ) experience a false breakout (bull trap) when the price hit $71.66 in July. Furthermore, the shares have retraced most of its gain in 2024 and broke a prior support level at $65.52. Upcoming support is at $62.34 and, below that, $59.32 which is the long-term uptrend line. To the upside based on yesterday’s encouraging bounce, it is close to forming a rising column of X’s and its near-term resistance level is $66.18 which is the 3-box reversal. If it manages to break above this resistance point and reverse trend further from this recent price correction next resistance is at $69.55.

With a SMAX score of 5 out of 10, EWJ is showing some near-term strength against the asset classes.