From Reuters: “Copper prices dipped on Tuesday, as disappointing property sector data from China raised concerns about the outlook for demand from the world’s top metals consumer.”

Copper has been oscillating near the $3 mark for well over a month now and speculators (both large & small) have continued to pile on bearish bets:

Copper_Cot_11.18.2014

This is the sort of CoT setup (Commitments of Traders Report from the CFTC) that more often than not results in vicious short squeezes. However, the technical structure of the copper market is far from constructive with support near $3 being repeatedly tested and bounces becoming increasingly shallow.

While there are mixed cross currents, the fact remains that copper rises and falls based on one country:

Copper_demand_production

As evidenced by the above charts, China drives copper demand and any sign that China is slowing is sure to lead to a sizable decline in the copper price. Regardless of the eventual outcome, it is unlikely that copper will remain anchored near $3/lb and it is becoming increasingly likely that copper is gearing up for a large directional move. Given that the copper market has historically frustrated the majority of market participants, we wouldn’t bet against a short squeeze occurring before the end of the year…

 

Read also: Copper Quandary