Base metals sold off between January and September of 2018. No coincidence this happened during emerging markets weakness and commodities and emerging markets are highly correlated. What’s the expectation of InvestingHaven’s research team going forward? In sum, it seems that base metals are about to move higher into 2019 or they might break down already in 2018. Note that there is a strong correlation between base metals and silver, so investors should keep a close eye on base metals to understand if our silver price forecast for 2019 will materialize.
We can talk a lot about base metals but we can also be very brief. We choose the latter in this article by focusing on the base metals chart combined with inter market dynamics, as opposed to analyzing leading base metals with their fundamentals.
Base metals: intermarket viewpoint
Intermarket dynamics may be challenging for base metals in the very short term. It is tough to say how this week’s stock market sell-off will evolve, even if we believe there is no stock market crash underway in 2018 it still is true that some damage was created this week. Moreover, when it comes to commodities in general, they tend to move lower when stock markets are weak. Emerging markets are also not in a great shape at this point in time, especially China’s stock market may need a couple of months before recovering.
So from an intermarket perspective the picture may look somehow shaky, not greatly supportive as of yet.
Base metals chart into 2019
The base metals chart representing the sector is the DBB base metals fund embedded in this article.
From a chart perspective the DBB fund did exactly what it had to do. After its secular breakout of September last year it topped in January of 2018 only to come down sharply.
However, very important to note, the 2018 sell-off stopped right at the breakout level. Needless to say, this may be very bullish going forward provided the 15.5 level in DBB is respected.
The base metals chart going into 2019 says that DBB is range bound (read: neutral) between 15.5 and 17.7. Once it crosses 17.7 it will be very bullish though!
The bearish scenario kicks in below 15.50. If this would happen we expect it will take place still in 2018, and a serious breakdown will be the result. The line in the sand is 15.50.
Base metals, according to us, need some time to digest their 2018 sell-off. They remained remarkably resilient during this week’s broad market sell-off, which is a good sign.
Our forecast? Neutral in 2018 and a big breakout in 2019. Especially some specific sectors like lithium and silver may do very well in the near term!