Latest / The Day Trading Podcast with Fexingo: Active Trading, Charts, and Short-Term Market Strategy / How Day Traders Read the Copper All-Time High Signal
Transcript
- Lucas: Copper hit an all-time high yesterday, August sixth, and I think for day traders that is one of the loudest macro signals we've had all summer. Luna: And the S&P is up two percent in five days, the VIX is down near fifteen. So the whole market is in risk-on mode. But why is copper the tell? Lucas: Because copper is the metal with a PhD in economics, right? It gets used in everything from wiring to construction to electric vehicles. When it breaks to a record high, it's not just a commodity story. It's saying that the global economy is expected to need a lot more stuff. And that has a direct read-through to equities. Luna: So how do we actually trade that read-through? I mean, you can't just buy copper futures if you're a day trader. Or can you? Lucas: You can, but most retail day traders aren't trading COMEX futures. What they're trading is the equities that move with copper. So the first thing I look at is the miners. Names like Freeport-McMoRan, Southern Copper, those are the high-beta ways to play copper. But you also get the industrial names, the ones that consume copper, and even some tech names that have copper exposure in their supply chains. The key is to find the ones that haven't already priced in the move. Luna: And that's the tricky part, right? Because by the time copper is at an all-time high, the miners might have already run. So how do you know if it's too late? Lucas: That's the million-dollar question. And the answer is you don't know. But you can use a simple framework. You look at the relative strength of the stock versus copper. If the stock has been lagging copper for weeks, and copper breaks out, that's a catch-up trade. If the stock has already doubled, you're chasing. So I always look at the ratio, like Freeport versus copper futures, and see if it's been diverging. Luna: So you're looking for divergence. But what about the macro side? The jobs miss on Friday, that's pushing rate-cut odds up. Does that help or hurt copper? Lucas: Short term, it's a green light. A weaker jobs number means the Fed is more likely to cut rates in September. And rate cuts weaken the dollar, and a weaker dollar makes dollar-denominated commodities like copper more attractive. So you get this double tailwind: expectations of more economic stimulus and a softer dollar. That's why copper spiked even after the jobs miss, which might sound counterintuitive. Luna: So it's not just about China anymore. It's about the Fed and the dollar. Lucas: Exactly. And that's a shift from a few years ago when copper was all about China's property market. Now you've got infrastructure spending in the U.S., the energy transition, AI data centers that need massive amounts of copper for power and cooling. So this move has a different character. It's not just one country's cycle. It's a structural demand story. Luna: And that's why the correlation with the Nasdaq is interesting. Because AI and tech are such big copper consumers. So when copper breaks out, tech names might follow. Have you seen that play out this week? Lucas: Yeah, the Nasdaq is up three percent in five days, which is the best of the major indices. And part of that is the AI trade reigniting, but the copper signal adds a confirmation. When you see copper and the Nasdaq moving together, it's a sign that the rally is broad-based, not just a few mega-cap stocks. And that's the environment where day traders can find opportunities in mid-caps and small-caps too. Luna: So what's a specific setup you'd look for today? Say copper is up another percent at the open. What's the play? Lucas: I'd look for miners that are gapping up but not too much. Say a stock like Freeport is up two percent premarket. I'd wait for the first pullback, and if it holds the previous day's high, I'd buy that pullback with a stop below the low. The key is to not chase the open. All-time high in copper gives you a thesis, but the execution still has to be disciplined. Luna: And what about the VIX? It's at 14.90, which is pretty low. Does that change how you size positions? Lucas: It does. Low VIX means complacency, so I'd actually trim my size a bit. The moves can be sharper when everyone's comfortable. But it also means the trend is your friend. So I'm looking for continuation, not reversal, until the VIX starts to spike. Luna: That makes sense. So copper all-time high, low VIX, rate-cut expectations. It's a pretty clean risk-on setup. But what could break it? Lucas: The biggest risk is if copper reverses hard. If copper gives back the breakout, that would be a signal that the move was overdone, and you'd see the miners and maybe tech sell off too. So I watch copper's previous high, which should act as support now. If it breaks below that, I'd close my long positions and possibly look to short the miners. Luna: So you're using copper as a leading indicator for the whole trade. That's a solid framework. Lucas: Right. And it's a framework you can apply to other commodities too. But copper is particularly useful because it's so cyclical and so tied to global growth. Luna: And it's a story you can tell your friends at dinner. 'Copper just hit an all-time high, and that's why the stock market is up.' Lucas: Ha, exactly. Which reminds me, you know, if these conversations have helped you think about the market differently, and you want to keep this podcast ad-free, there's a way to support us. It's buy me a coffee dot com slash fexingo. Luna: Yeah, it's a small gesture that keeps the lights on and helps us keep doing this every day. No pressure at all. Lucas: And honestly, if today's episode was worth a coffee to you, that's the link. But back to copper — one thing I want to touch on is the supply side. Because this isn't just a demand story. Luna: Oh, right. There've been disruptions in Chile and Peru, the big producers. And a lot of the easy copper has been mined already. Lucas: Exactly. The grade of ore is declining, so it costs more to extract the same amount. That's a structural supply constraint that supports higher prices for years, not just months. So when you see an all-time high, it might be the start of a longer-term trend, not the end. Luna: So for a day trader, that means you can be more patient with your winners. The trend is your friend, as they say. Lucas: Right. But you still have to respect the daily noise. And one way to do that is to watch the copper to gold ratio. When copper is rising relative to gold, it's a risk-on signal. When it's falling, it's risk-off. That ratio is a nice macro indicator for the whole market. Luna: And where is that ratio now? I assume it's popping with copper at a high. Lucas: It's definitely trending up. Gold hasn't been as strong lately, so the ratio is making new highs. That confirms the risk-on tone. And as a day trader, you can use that as a filter — if the copper to gold ratio is rising, you should lean long on the day, especially in cyclicals. Luna: That's a clean rule. Now, what about the earnings calendar? We had some big movers after hours last night — Twilio, Airbnb, DraftKings. Any of those related to copper? Probably not. Lucas: No, not directly. But it's a good reminder that single-stock news can override the macro signal. So even if copper is screaming higher, a bad earnings report can sink a stock. That's why you always have to check the calendar before you take a trade. Luna: So the copper signal is a backdrop, not the whole movie. Lucas: Exactly. It's the macroeconomic wind, but you still have to sail your own boat. And speaking of which, one thing I want to mention is the 23-hour trading session. That's been a game-changer for reacting to overnight moves like this copper breakout. Luna: Oh, we did a couple of episodes on that. But remind me, how do you use it for a commodity-driven move? Lucas: Well, copper futures trade almost around the clock, so you can see the signal before the stock market opens. If copper is making a new high at 2 a.m., you can prepare your watchlist and set alerts. And with 23-hour single stock futures, you can even trade the miners overnight. That's a huge advantage for day traders who want to catch the move from the start. Luna: So you're not scrambling at 9:30. You already have a plan. Lucas: Exactly. And that's the professional way to trade a macro event like this. You see the setup overnight, you plan your entries, and you execute with discipline during the regular session. Luna: Alright, so to sum up: copper is at an all-time high, that's a risk-on signal, trade the miners but be selective, watch the copper to gold ratio, and don't ignore earnings. Anything else? Lucas: Just one last thing: remember that all-time highs in commodities can be followed by sharp pullbacks. So don't get complacent. Use your stops, manage your risk, and let the trend work for you. Copper is telling us something big, but you still have to listen to your own account. Luna: Well said. And that's a wrap for today. We'll see you tomorrow. Lucas: Keep an eye on copper, folks. It might just be the canary in the coal mine.