FCX, Freeport-McMoRan Inc update and copper

August 29, 2015August 29, 2015 Hamilton

First the then, Dec. 2012 and June 24th, 2015, and now charts.

We were bearish for a lot longer, please also see older blogs, but back in 2012 we set a credible EW target of about $10 and for copper itself of $2.20. FCX with the “Greenberg” deposit in Indonesia is, as far as we know, still the largest copper producer in the World. The $10 target derives from equality between the C and A legs but did not create a new low, that is below the $8.40 of 2009. We got that with the $7.76 low last week. Copper, see chart below,then, Dec. 2012 and now, conveniently complied by dropping precisely to the $2.20 level.

We do not know if Karl Icahn is an avid reader of this blog – we know there are 40.000 but we do not know who they are individually – but supposing he is and did take the above to heart and bought an eight and one half percent stake in FCX. If he bought at the low he is now up 25%, not bad for two days work. That represents about $80 mln. It could have been yours!

The 2012 A-B-C EW count for FCX is, of course, completely wrong (C waves must be 5 waves, not A-B-Cs) but the target is nevertheless accurate, at least so far..

TRQ update and Copper, the stuff

June 24, 2015 Hamilton

The usual, then Feb. 2014, and now charts;

Turquoise Hill Resources – formerly Ivanhoe – had completed a full correction, an A-B-C, with all the requisite subdivisions , in particular a 5th wave wedge in the C leg, which confidently suggested this was a buy. It was. The low was at $3.17 and the high after that at $5.80 and we defined the break-out point at about $4. In short you could have easily made 30+% This massive mine is now owned by Rio Tinto (51%) and represents a significant part of the Mongolian economy. A collaborative approach to operating this asset is now in everybody’s interest. Consequently more upside is in the cards. In EW terms $10, the base of the wedge or wave 4 of C, is a reasonable goal.

Copper itself may not fare quite as well. It has not returned to the lows of 2008/9, not even close as this long-term chart clearly shows;

or in more detail;

Starting with the top chart, this is from the LME where they do things in pounds per ton, it is obvious that we are still well above the yellow 50+ year channel. So, if we were ever to regress to the mean, there is still serious downside potential, perhaps towards $2 or even $1.50 a pound. EW targets would be even lower than that, more like $1.25.

If nothing else, the long-term chart of copper shows how extraordinary this, give or take, ten year period from 2004 to the present has actually been. Linear extrapolation no longer has any predictive value.

Alchemy, and we thought it impossible! Copper, Gold.

January 13, 2015January 13, 2015 Hamilton

Here are two charts from InfoMine, same scale, same timeframe , more or less, and so on. On the left Copper and on the right Gold.

With the exception of the spike down in 2008 for copper the two charts are very similar. Both have their lows in or around 2001+ and both peak in 2011+. Moreover both manage an amplitude of about 9-times. The most recent, multi-year correction takes back roughly 3 out of 8 lines which equates to about 38%, normally a Fibonacci minimum. We can only speculate why the exception of 2008 occurred, perhaps copper as a base metal is more sensitive to economic growth which seemed to disappear during the initial phases of the great recession. Or perhaps gold was more sensitive to the expansionary monetary experiments of the Worlds central banks. Whatever the cause it is clear that the difference was short lived and that for the most part the two metals behave like twins, have an extremely high correlation (at least for this time period!), and are essentially interchangeable as if alchemy actually works. Those that delight in conspiracy theories might want to delve deeper into what the Chinese have been up to.

For our purposes all this is important only in that if you can predict one, you can predict the other. Here are then – 29, Oct., 2012 – and now charts;

That was a bulls eye even if it took a year and a half longer. Nevertheless we do not think the count at the time was correct. For the triangle to be a 4th wave it is too big. A 5th wave may have started earlier and taken the form of a wedge. This would then complete wave A or 1 down at toady’s low. Perhaps a better characterization would be a double zig-zag with the triangle in the middle as the X-wave. We are not entirely sure as other variations are possible but the main thing is that we got to $2.70 per pound, the initial target. At the very least we would expect a pause of some duration at this stage, more or less. So if that is the case with copper, why not with gold?

TRQ, TSX, Copper and so on

February 15, 2014February 15, 2014 Hamilton

The other day there was this fellow on BNN that suggested that the TSX has broken lose from its correlation with copper. He is pretty good (Price?) despite sometimes looking like a hippie. Here is the argument:

The InfoMine Copper chart is expressed in US dollar terms and the TSX in Canadian; both charts cover roughly the same time period. The correlation is not perfect but does get a little better if you make adjustments for the exchange rate (a low in 2001). Certainly for the past few years the correlation is pretty good, but notice that in the last year the two have parted company with the TSX going up and copper going down. Perhaps Canada is more a petro country than a copper country. In any event I have drawn a line through the TSX chart which is my best effort at finding the middle of the range for the past 25 years. If that line holds (on average) the TSX should be at about 15000 in 3 years time (starting where it is now, not where it is on the average line). That works out to about 10% for the whole period or roughly 3 % per annum. The question is “Why would you do that??”. Why not buy TRQ instead?;

We thought (see previous blogs) that this stock was a screaming buy. It did go up about 30% but has settled down back to $3.25. A drop to $2 ( a wave 4 of prev. degr.) or so cannot be completely excluded but we prefer to think that the stock is already on the way up. The initial target regardless of the path it takes, is around $5.50 (the wave 4 of 5 of C triangle). The copper price is barely relevant and it has a lot of gold as well. In short , if you like the TSX because it correlates well with copper you have to like TRQ more. If you like the TSX because it has detached itself from copper, you should also like TRQ more as it is down 90% rather than about 10% for the TSX. Buy low sell high, not buy high and sell low.

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