Commodity Market: Wall of China Analogy Meaning

Copper is a commodity whose consumption shows the world at what rate a particular nation is growing and here comes in picture the wall of China analogy which stems from its copper consumption. we all know that rise in copper prices was due to strong demand and hoarding in China. As China began tightening its monetary policy, demand began to ease in the country, leading to a steady fall in prices.

Now we all know that decline since February 2011 has now taken copper prices to its 200-day moving average, which essentially is the Chinese wall of support for the metal. Copper is a leading indicator of what the stock markets will do. In late December 2008, copper bottomed and began to consolidate, by moving sideways. The stock markets continued down, but copper was giving a signal that the equity markets would turn soon.increase in the demand for copper indicates that the economy is gathering steam. There is lag between the purchase of copper by a manufacturer to completion of the product, its sale and revenue realisation. Increased revenue realisation by companies results in a rise in the equity prices. Hence, we see copper prices leading the equity markets.

When prices are above the 200- day average and retreat down to it, the average acts as support. On the other hand, if prices are below the average and prices rise up to it, the average acts are resistance. Prices often bounce from support and fall from resistance.

Thus we can see that by tracking a single commodity one can foretell the state of the market in the coming days and thus as a technical analyst one can not ignore the happenings on the global scene as well as at domestic and commodity market. This is the reason that our share market tips provided to free and paid tips rocks every day irrespective of the condition in the market and probably that is the reason Google has classified us as the best share tips provider for NSE and BSE.