*futures and options involves risk and is not suitable for all investors or traders. Only risk capital should be used. Margins are subject to change. An investor could potentially lose more than originally invested.*

The commodity bubble has burst and no one has paid much attention. Everyone is interested in hearing about the next Bailout Plan for the next Blowout Economy, but you might want to start paying attention to one commodity that could give you an insight to our foreseeable future... and thats the Copper market. Many analysts suggest that copper prices give a general idea if the world economy is growing, shrinking, or just treading water. Well you don't need a weatherman to know which way the wind blows right now, but what can we expect moving forward into 2009. Here are a few reasons why Copper prices may give us hope for the future.  

Right now the Canadian dollar is in a huge downtrend. Canada's curreny is hyper-sensitive to significant changes in their most abundant resources which include Oil and Copper. With a roughly 20% loss in value in the Canadian Dollar relative to the US Dollar I see more US and Chinese buying coming into the market. As your home currency rises relative to the country you are purchasing from, goods and services become that much more attractive. Right now I see them 20% more attractive. One might argue that tight credit will strain purchasing, and with copper being a huge cash market, I can see the implications for Joe the small business owner. Having said that, Copper is one of the most widely used commodities in the world, and I see continued purchasing at the same price bringing in more product. The major mining company stocks will be seen as value plays. The increased inventory may cause a trickle-down that allows you the consumer to get your finished product at more attractive prices. The big question is when?

 Looking forward into 2009 the US will have a new President in office. At the same time we will have been through the worst financial crisis in history. We will also have passed through a full quarter of the highest market volatility in history. Many of the current bailouts and cash injections will have had some time to find their way through the system. There should be more transparency and a better understanding in where we go from here, which may cause the market volatility to subside. I don't see Goldilocks on the horizon, but Alice in Wonderland markets may come to an end.   Investor confidence may come back into world stock markets providing more volume and resilience and less theatrics.   

At the same time in China, January 26th represents the Chinese New Year. If you follow Copper you may have noticed that this is a major building season for the Chinese and that Copper prices have reflected their buying interest in years past, generally seeing a $1.00 rise in the price of copper per pound around the New Year. A $1.00 move represents $25,000.00 USD in the Globex/Comex Copper contract . Also, if you take a look at (LME) London Metals Exchange Copper stocks over the last three years you will notice that there have been significant drops in Copper stocks from the end of November into the following year. I would attribute this to big purchases by China. Once seen on the stocks side, speculators jump onboard driving up the price. When the shelf is full things go on sale... and people come in and buy. China's been rebuilding there whole infrastructure for the last 5 years and although purchases have slowed, I don't see them stopping. They have simply gone from running high on all four burners to low.   This year I would expect to see March 09 copper futures run to 2.05/lb, possibly 2.20/lb if the Chinese bailout has positive results in a fast fashion. This would be roughly half the $1.00/lb moves we've seen in years past.   charts courtesy of kitcometals.com and barchart.com

TECHNCIALS   Buying interest may come near the 1.55 price level in the HGH9 contract, which looks like strong support on the 5-year chart. I would be looking to exit as close to 2.00/lb as possible. From what I see the 1.55/lb price level could be the stronghold for copper on the downside. Otherwise .60/lb looks like reality.

CURVEBALL: You notice support coming into many markets that have strong fundamentals like the grain, energy, and precious/base metal markets. In my opinion this is due to the fact that the world is growing. A economic slowdown isn't going to change the fact that all people everywhere want to eat and have modern style of living. But it may affect the supply/demand curve and speed that we get there.

futures and options involves risk and is not suitable for all investors or traders. only risk capital should be used. margins are subject to change. an investor can potentially lose more than originally invested.