Industrial Metal Bulls Trying to Escape Bears’ Clutch
???? Fundamentals
Just when it appeared that the industrial metals complex was going to be mired in a bear market, better than expected wholesale inventories data and lower inflation reading from China gave support for Copper prices. In addition to better economic data, a nationwide miners’ strike in Chile helped support prices. The Commerce Department reported that U.S. wholesale inventories fell by 0.3% in February, vs. an expected increase of 0.6%. In addition sales also increased by 1.7% led by computer equipment and nondurable goods sales. Inflation data out of China was subdued, with March CPI rising by 2.1% vs. 3.2% in February. Many traders hope that lower inflation readings will allow the Chinese government to continue with stimulus measures to meet the targeted growth rate of 7.5% and help spur increased demand for commodities, including Copper. On the supply side, 25,000 miners have staged a 24-hour strike in Chile, the world’s leading supplier of Copper, in order to bargain for better wages, benefits, and working conditions. While a short-term labor stoppage should have little effect on Copper supplies, it does raise concerns that future production may be curtailed, and should such events occur, we may see a lower Copper surplus than previously thought.
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???? Technical Notes
Looking at the daily chart for May Copper, we notice that Tuesday’s price surge propelled the market above the 20-day moving average (MA) for the first time since February 15th on a closing basis. However, profit-taking by weak longs has kept prices from advancing further. Prices are, however, trading above the downtrend line drawn from the February 19th high. This was the day in which a dramatic downward move in prices triggered the nearly 2-month decline in prices.
The 14-day RSI has moved out of oversold territory and is currently reading a more neutral 44.08. The next resistance level is seen at the chart “gap” of 3.5100 made back on March 18th. Support for May Copper is found at the April 4th low of 3.3060.
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