Copper’s historical correlation with the S&P 500 is flashing a potential warning for equity markets, as technical and macroeconomic indicators suggest a possible blow-off top forming in the second half of 2025.

According to Bloomberg Intelligence senior commodity strategist Mike McGlone, the copper market is approaching a critical support level near $4.44 per pound, a trendline that has held since the 2020 pandemic lows. 

This level now serves as a key test for both copper and, by extension, the broader equity market. 

In an X post on August 5, McGlone noted that a decisive breakdown could signal broader risk-off sentiment and the exhaustion of the current bull run in stocks.

The concern arises from copper’s strong relationship with the S&P 500, considering that over the past decade, both have moved in tandem, with the metal often acting as a barometer for global economic health. 

According to the expert, the current setup shows copper lagging while the S&P 500 continues to hover near record highs, raising the possibility of a divergence that could trigger broader volatility.

Gold/copper warning signal 

Adding to the bearish outlook is the record-high gold-to-copper ratio, which is often used to gauge economic risk appetite, suggesting rising investor caution and potential recessionary pressures. 

To this end, a high gold/copper ratio typically reflects weakening industrial demand and increased demand for safe-haven assets, both of which are negative for cyclical markets.

Together, the weakening copper trend and the surging gold-to-copper ratio paint a concerning macro picture. 

Now, if copper fails to hold its critical support line, it may confirm that equities have entered a late-stage speculative phase, potentially setting the stage for a blow-off top and a sharp reversal across risk assets.

Featured image via Shutterstock