By Dana Lyons
On March 5, we noted that the SP GSCI Industrial Metals Index was “Hanging On The Precipice” of a major long-term support level. At the time, the global deflationary spiral was reaching its nadir as all matters of commodities and pricing metrics were reaching multi-year lows. Not coincidentally, the U.S. Dollar was soaring at the time to new 12-year highs. The concern with the Industrial Metals space threatening to break down was the inherent message vis-a-vis the global economic outlook. As we stated in the March post:
It makes sense that pricing of industrial metals (like aluminum, copper, nickel, zinc, etc.) would make for a decent barometer of economic strength. These metals go into the manufacturing of a myriad of products. Thus, their pricing, i.e., a sign of the level of demand for these metals, is a tip off to the level of global economic demand present.
The failure of the Industrial Metals complex to hold key support would appear, to us, to bode ill for the global economic outlook. The key support level threatening to give way was the 61.8% Fibonacci Retracement (near 307) of the rally from 2009 to 2011 to which the Index had recently dropped. That level,