Following the May 9th Market Minute titled "Downward trend starts", global markets are continuing to rollover. Copper, often referred to as a bellwether indicator on the broader economy, is also declining. The peak in copper prices was in early 2011 and it has dropped steadily over the past year.

The Dow Jones World Stock Index is closely following the trend of the red metal. Global markets have also crested in the first half of 2011.

Copper prices are forming a multi-year reversal pattern. This Head-and-Shoulders formation suggests that the metal will move below $3.25 in Q3 and eventually reach a downside target of $2.25.

Bottom line: Copper prices still need to decline below $3.25 before the reversal pattern is complete. Nevertheless, the probability of lower numbers over the summer is high. Given that metal prices have already dropped over a dollar in the last year, this reflection on the world economy implies slower growth in the months ahead.

More research on commodities and global markets will be in the upcoming June newsletter.

By Donald W. Dony, FCSI, MFTA
www.technicalspeculator.com

COPYRIGHT © 2012 Donald W. Dony
Donald W. Dony, FCSI, MFTA has been in the investment profession for over 20 years, first as a stock broker in the mid 1980's and then as the principal of D. W. Dony and Associates Inc., a financial consulting firm to present. He is the editor and publisher of the Technical Speculator, a monthly international investment newsletter, which specializes in major world equity markets, currencies, bonds and interest rates as well as the precious metals markets.

Donald is also an instructor for the Canadian Securities Institute (CSI). He is often called upon to design technical analysis training programs and to provide teaching to industry professionals on technical analysis at many of Canada's leading brokerage firms. He is a respected specialist in the area of intermarket and cycle analysis and a frequent speaker at investment conferences.

Mr. Dony is a member of the Canadian Society of Technical Analysts (CSTA) and the International Federation of Technical Analysts (IFTA).

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