FCX and Doctor Copper

Historically Copper has been considered a leading indicator for the market, thus the phrase, "Dr. Copper", some believe that is now turning toward lumber, in any case, I think Copper still has utility as a market indicator.

We're going to take a look at FCX again as there's a probable trade here.

 FCX broke out of a triangle, near the top note the shooting star, a small consolidation (about 2 weeks) then the decline started. Even in the decline, there were or was at least one decent counter trend rally of a little over a week, during that time period it may have seemed disheartening for a short, but this is why I encourage you to look at historical trade to see what is normal and to view the market in longer term then just intraday or day to day action which has a lot of noise. Most recently FCX formed a lateral consolidation which it just broke below today.

 As far as a longer term view, the daily Trend Channel would have kept you short even through the lateral consolidation, the stop is now just below $40.

 Here's FCX in green vs the SPX in white, note the divergence after having tracked the rally since October nearly tick for tick.

 This is A Copper Index vs the SPX, it too has diverged in entering a range rather then making new highs.

 Note FCX's lateral trend (remember there are 3 trends as mentioned earlier) found support right at the breakout/apex of the triangle and the break below came on increased volume.

 Here's FCX's longer term 3C chart (60 min), you can see confirmation of the trend, a negative divergence at the top and a positive divergence that led to a lateral consolidation, not an uptrend.

 On a 5 min chart we can view the underlying action within that consolidation, remember the post late yesterday on AAPL, but talking about how market makers/specialists will move the market to fill an order at a particular level. It appears that FCX had a large sell order or maybe short order and the consolidation seems to be the specialist working the order, being careful not to let FCX slip below support.

This would be an example of the target fill price using a VWAP (Volume Weighted Average Price-Institutions commonly judge their fill by looking at the average fill compared to the VWAP, if the specialist did better then the VWAP, they'll get more future business, if worse, then probably won't get more business).

This puts all of those positive and negative divergences in to perspective as the Specialist tries to get an average fill price near the VWAP

 The 2 min chart is largely in line with the move down/confirmation.


 The 1 min chart shows what may become an intraday positive divergence (it's hard to say as it hasn't turned up yet), but this would make some sense.

Whenever there's a break of important support,there's almost always a shakeout move, it use to be a move to kiss support good bye which would be at the trend line, but more and more often, there's a stronger shakeout move, so a move to fill the gap may very well be a decent place to consider shorting FCX.