Is Dr. Copper Starting To Turn Bullish?
Today’s Spotlight Market
One potential ?wildcard? that could affect the direction of Copper prices in the coming months deals with the potential use of metal inventories by Chinese businesses as collateral for loans and financing. There are concerns that any government crackdown on business lending could see metal that was backing loans flood the market, which could potentially depress prices.
The Copper market is said to have a Ph.D in Economics, at least by some in the metals trade, as its price movements have tended in the past to correspond to shifts in the direction of global economic activity. Recently, Copper prices have rallied off lows not seen since the summer of 2010, despite concerns that demand from China, the world?s largest consumer of Copper, will slow.?
Data out of the world?s most populist nation shows declining rates of economic activity of late, primarily out of regions of the country that have a heavy industrial presence. This would normally indicate that demand for industrial commodities such as Copper and other base metals would decline. However, Copper inventories held in London Metal Exchange (LME) warehouses have been in a steady decline the past 30 days, and buying for China?s state-owned reserves has increased as prices headed for multi-year lows.
In the coming days, base metal trades will have a slew of data to ponder, including a report on Chinese manufacturing activity, the statement following this month?s FOMC meeting, and of course the always anticipated U.S. Non-farm Payrolls report for April. It appears Dr. Copper is going to earn his degree this year!??? ?
Technical Notes? -? View Today’s Chart
Looking at the daily chart for July Copper, we notice the upside breakout from the 6-week consolidation has not triggered any additional momentum buying as prices have retreated to the upper bounds of the consolidation pattern. Prices have remained above the 20-day moving average (MA), but remain 17-cents below the longer-term 200-day MA. The 14-day RSI has moved back into neutral territory, with a current reading of 51.75. This past Monday?s high of 3.1390 looks to be the next resistance level for July Copper, with support found at the March 19th low of 2.9275.
This article is provided for informational purposes only. No statement in this article should be construed as a recommendation to buy or sell a security or to provide investment advice. The content provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy and completeness. optionsXpress makes every effort to provide timely information to its recipients but cannot guarantee specific delivery times due to factors beyond our control.
Derivatives involve substantial risk and are not appropriate for all investors. Please read the?“Disclosure Statement for Futures and Options”?prior to investing in futures or options.
For investments using a straddle or strangle options strategy the potential loss is unlimited. Multi-leg option strategies are subject to multiple commissions. Profits may be eroded by the commission expended to open and close the positions and?other risks?apply.