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Copper poised for seasonal rally
By: Almanac Trader | December 13, 2018

Copper has a tendency to make a major seasonal bottom in December and then a tendency to post major seasonal peaks in April or May. This pattern could be due to the buildup of inventories by miners and manufacturers as the construction season begins in late-winter to early-spring. Auto makers are also preparing for the new car model year that often begins in mid- to late-summer. Traders can look to go long a May futures contract on or about December 17 and hold until about February 24. In this trade’s 46-year history, it has worked 30 times for a success rate of 65.2%. After four straight years of declines from 2012 to 2015, this trade has been successful the last two years.



In the above chart, the front-month copper futures weekly price moves and seasonal pattern are plotted. Typical seasonal strength in copper is highlighted in yellow. Last year’s seasonal period was actually tepid. The move off of copper’s December low to its late-December high was greater than the gain over the entire holding period. Copper also spiked in mid-June before succumbing to typical seasonal weakness. Copper has been essentially range bound since late-September. A reduction in Chinese tariffs on imported autos (along with the potential easing of other tariffs) could be a catalyst for copper to begin its seasonal rally soon. Any improvement in the U.S. housing market will also likely support higher prices for copper.

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