Copper Rallies in Response to China Data

Today's strength in the risk-on markets in general and in the industrial commodity markets in particular likely reflects a collective sigh of relief that China Q4 growth came in a touch better than expected -- at 8.9% versus 8.7%.

This has triggered some short-covering and perhaps optimistic new buying interest ahead of renewed optimism about forthcoming China economic stimulus, as noted in the charts on copper, silver, and oil.

Copper, in particular, as viewed on the daily globex chart, has emerged from its Oct-Jan sideways congestion area, leaving behind a base-like structure that has the potential to propel prices above key resistance at 3.77-3.90.

Such a thrust will trigger near-term buy signals that will point copper towards a test of its Feb 2011 to Jan 2012 resistance line, now at 4.12.

We must focus increasingly on the industrial commodity markets as a gauge of perceptions of Chinese demand for goods and materials, which could have a significant impact on the global economy going forward ... provided the China data are not smoke and mirrors ahead of a hard economic landing.

ETF traders may want to keep an eye on the iPath Dow Jones-UBS Total Return ETN (JJC), iShares Silver Trust (SLV) and US Oil Fund ETF (USO).