Thursday, December 4, 2014

Copper loses to chips as stock indicator

The commodity that’s said to have a Ph.D. in economics because of its value as a growth indicator isn’t much of a stock-market barometer, according to Andrew Thrasher, an analyst at Financial Enhancement Group.

“Dr. Copper in my opinion has been replaced by technology, specifically semiconductors,” Thrasher wrote in a blog posting yesterday. “The market seems to be much more focused on the happenings of Silicon Valley than Milwaukee or Detroit.”

 S&P 500 Index, the Philadelphia Semiconductor Index and the price of copper in New York since March 2009, when stocks began their current bull market.

Copper futures set a record in February 2011 and tumbled 37 percent through yesterday, when the price for March delivery settled at $2.9145 a pound on the Comex. At the same time, the Philadelphia index of 30 chip producers rose 51 percent. The gain was in line with the S&P 500’s advance of 56 percent.

The semiconductor-stock gauge peaked in 2011 about two months before the S&P 500 began a 19 percent drop, the bull market’s biggest retreat, as Thrasher wrote in the posting.
“Ever since then, we’ve gotten confirmation” of the S&P 500’s highs from chip shares, he wrote. The Indianapolis-based analyst added: “It seems copper has been expelled while the semiconductors step to the front of the class.”

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