Copper ended August with a bearish outside reversal bar (a higher high, lower low and a close below the previous month's low). This also completed the anticipated bearish setup in the RSI(14) by having August take out the May low after July put in a lower high than February.

The rollover of the 20-week average and the MACD crossing its average confirmed the sale. Look for this top process to be followed by a cascading waterfall. A minimum drop of 30% (targeting $3.20) can be anticipated, however something closer to 40% ($2.70) would be normal.

Major base metal producers (BHP, RIO, FCX & TCK) continue act poorly with the 50-day and 50-week averages capping the last four week's highs. It is now time to lower our sights and monitor the 20-day averages as the new resistance.

The last five sell signals in copper saw BHP decline by 74%, 27%, 24%, 29% and 12% from the high.

Various related bearish ETFs and options are available; BOS, BOM, JJC, HKD.TO and HMD.TO.

Weekly and daily charts

Weekly charts from failed monthly RSI tops.

Arrows identify the bearish rollover in the 20-week ema or crossover of MACD

Seasonality favored a topping process with a failed high in September and a hard decline to follow.

BHP Billiton, Rio Tinto, Freeport McMoran and Teck Resources

Bob Hoye

Institutional Advisors

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