Wednesday, December 20, 2006

Copper Cropper

Regular readers of this blog will notice that I have given a lot of attention to copper futures over the last 6 weeks or so. The reason is that I think it could be a good leading indicator for the health of the US/western economy - China story interplay. The precious metals have currency/inflation implications affecting price, and equities..... well in my opinion that's fantasy land affected more by spin than economic factors.

Copper is not greatly affected by these factors; BubbleVision doesn't talk about it much, if at all, so it is a pure supply and demand play... give or take the odd hedge fund trade.

For quite a few months I've held the view, and I'm not alone in this, that the copper story is all over for now, that we'll see lower prices going forward.

The thing is, since the low at around $2.97 per/lb printed during the retracement from the high of the year, copper futures have been doggedly supported at this, and points north.

On Dec 7, I posted up a chart of where I thought copper *might* go over the short term and this seems to be going according to script... at the moment anyway. March Copper futures today have broken below that $2.97ish support.

Now, it's not a convincing break by any stretch of the imagination and it could even finish the day back above support. I also fully expect buyers to show up at some stage over the next few days anyway, so this "scenario" will still need some time to play out and either confirm itself, or for buyers to come in and support it for a while longer.

In any case, this really adds to the hypothesis I'm working on and I think this, as a leading indicator, is looking just that bit more bearish for the overall western economy.

Just my opinion folks.

8 comments:

Metal Trading said...

Copper market is waiting for State Bureau Reserves of China to replenish their copper stocks, but after waiting long they still have not bought copper in the market.

Rumour is that China is only willing to buy copper if the price falls to $5000. Without any strong reason for the price to rise, funds just sell off the metal and crash the price down.

http://basemetal-trading.blogspot.com/

Avalonian said...

Metal Trading,

With regards to your comments about me not mentioning tin, zinc, etc. (in the other comment)

The simple reason is the exchanges I trade on don't have contracts.

You are trading these on LME?

Is this accessible to retail traders?

Cheers

Brendan said...

Yes, LME is available to retail as well. I'm a broker for LME metals.

I had recommended my clients to short zinc if it rises above $3000. Plentiful of zinc supply will come in at year 2008 according to major zinc miners, hence zinc price is expected to fall.

http://basemetal-trading.blogspot.com/

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