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Could Copper Prices Be Headed to Below $3?
EWI’s Metals Specialty Service video reveals critical price levels to confirm a bearish near-term scenario is on tap

By Nico Isaac
Tue, 19 Mar 2013 19:00:00 ET
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You can't make this stuff up. On March 18, three copper thieves in rural Texas were caught red (metal) handed as they tried to hide themselves by ducking into a nearby storefront. Turns out the storefront was the local Sheriff's office. The travel distance to jail was brief indeed. 

Yet that's not the only act-first, think-later news story involving copper on that day. Copper futures also saw a 2.6% selloff on March 18, to its lowest price in seven months. In no time, mainstream financial commentators took copper's downturn and ran with it... straight into this line of fundamental fire:
 
"Copper Prices Plummet As Investors Fret Over Cyprus Bailout." (Associated Press)
 
Or lack of a bailout, as the case may be: The Cypriot Parliament rejected the EU's terms for receiving its 10 billion euro rescue package, namely, a 6.75% to 9.9% levy on bank deposits. Writes one news source: "The Cyprus news highlights what many investors would like to forget -- that the region's debt problems are ongoing… and that a solution continues to be elusive." (Barron's)
 
The solution to Cyprus's debt problems -- let alone the entire eurozone economy's -- has been  elusive for quite some time. You might argue that the introduction of the levy was the straw that broke copper's back.
 
Well, if that were true, then why did copper prices enjoy a 10% rally between August and December 2011? During that time the Cyprus Parliament imposed austerity via these (and other) measures:
 
·         The Bank Levy Legislation: An annual, .95% tax on all deposits of commercial banks. Part of the amount generated will be directed to an independent Financial Stability Fund over the next two years.
·         In August 2011, lawmakers approved an austerity package that would impose a 2.5% to 3% levy on the salaries of government workers with the revenue used to pay pensions -- in addition to raising the sales tax to 17% and drastically reducing social benefits.
·         October 2011, legislation is passed for an annual 350 euro levy to be paid by "every registered company."
 
Not to mention the fact that the Cyprus Parliament has been battling the European Union's bailout terms since it first formally applied for aid back in June 2012. Last November, authorities described certain conditions of a then proposed 17.5 billion euro bailout as "tantamount to a massacre." (The Guardian)
 
In the end, the mainstream copper analysts are guilty: As in, guilty of stealing an old, long-standing news event and trying to use it to explain new price action.
 
There is an alternative: Elliott wave analysis. Here, EWI's premier Metals Specialty Service provides the most objective assessment of the near-term Elliott wave patterns underway in copper. On March 18, Metals Specialty Service editor Mike Drakulich recorded a live, video update on copper that included this urgent message:
 
"After two to three weeks of trading near this key support level, we are now decisively below the lower trendline. We now have no business rallying back towards it at all. This is where it has to go for the bearish count to have its chance." 
 
 

 
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