I hadn’t meant to place any new trades that would be correlated with the global risk-off trade. However, copper’s recent behaviour has been too good to ignore. It broke below its 200-day moving average and has recently been re-testing it. In so doing it broke back about 3.00, but with high rather than exceptional thrust, and other recent days have had downthrust. It had been pulling back on volume, but then did not much on volume, and yesterday fell with volume and pulled back on low volume. I have taken this as an opportunity to enter.

As the bottom chart shows, copper’s highest (weekly) correlation is with AUD/USD, which I also hold. Its correlation with platinum is somewhat lower, but still positive. All the markets are being moved by the same swings in global risk aversion at present, so the correlations will likely be higher than usual. On the other hand, the very short-term rally in the AUD seems to be running out of steam, suggesting a pullback, so it might be a good time to be short copper, and copper and platinum have been behaving somewhat differently on a day-to-day basis of late. “One thing is not another thing” has become a maxim of the past few months, meaning that I have several times been frustrated when I have tried to avoid taking correlated risks and consequently stayed out of the market that actually had the move. I am nervous about the way that platinum is sitting on its 200-day moving average: if I get taken out by a quick reversal, I would still like to be short metals.

A point of concern on this little story is that Eurodollar futures are rallying strongly — I wonder whether the run up in the TED spread, and hence the withdrawal of global liqudity, is turning around. With Spanish banks effectively shut out of international money markets, however, I can’t believe the world’s short-term liquidity problems are really coming to an end so easily. Of course, the ECB may well be doing something supportive that I can’t see.