Copper mean reversion is complete

Copper completed a mean reversion I have been calling for the past 8 months.

It spent the majority of that time meandering around $4.50 and from a recent high of $5.00, it has fallen to my target price of $3.42 to satisfy my trifecta of a mean reversion to its 200 week moving average, registering a weekly oversold reading on its weekly RSI and trading to 2.5 standard deviations below its weekly mean.

As written in this weeks ‘Macro Extreme’s’ post, it is now giving us a Buy signal.

Although, markets and prices remain wicked and daily trading is not for the faint-hearted.

For example, in only the past 2 days, from $3.42, Copper traded down 4% to a low of $3.28 and reversed higher some 9% up to $3.58, to now be trading down 2% below that level at $3.53, at the time of writing.

Daily noise and headfakes can be dangerous.

Remember all that hubbub about copper shortages and electrifying the world including transportation?

Albeit that theme has legs and remains intact, investors can overpay for an asset, security or theme steeped in momentum and swallowed by the herds instincts, especially when euphoria is on the rise or near its peak.

See lithium, nickel, natural gas, tech stocks, aluminium, wheat, buy-now-pay-later IPO’s, etc etc.

July 8, 2022

by Rob Zdravevski

rob@karriasset.com.au