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Copper futures – prices continue to climb higher

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Friday, December 3rd, 2010
copper futures chart march

Copper Futures - March contract

March copper futures ended the week in positive mood, closing marginally above the 400 price point at 401.30 and ending with a narrow spread up candle, which built on the momentum from earlier in the week, which saw the base metal climb from a low of 370, and end with five consecutive days of gains. Indeed with the strong break and hold above all three moving averages on Wednesday, this has given us a strong buying signal, and with both the 9 day and 14 day moving averages about to cross above the 40 day moving average then this is adding further momentum to the positive tone for the metal. In the short term, we can expect to see the high of November breached in due course, and once clear of the 410 price level, then this will provide the necessary platform of support for further strong gains and a continutation of the longer term bullish trend in due course.

From a fundamemental perspective copper prices are continuing to gain due to two principle factors. The first of these is the ongoing supply/demand relationship, with copper mines still struggling to meet demand, particularly from China, whilst the second issue concerns the ‘mystery’ buyer who is alleged to be building a dominant position in the market according the the Financial Times -

Mystery trader captures 80pc of London’s copper market

The unknown buyer has been building up the dominant position since at least last week, putting a squeeze on the market. According to the rules of the London Metal Exchange, the trader must lend out copper if it holds between 50pc and 80pc of the total to maintain day-to-day liquidity in the market. The trader is currently lending at a 0.5pc premium to the cash price. The premium for spot price copper over delivery in three months’ time reached $89 in the middle of this week – the highest in two years.

Both of the above factors are helping to support copper prices, and drive the commodity higher, and indeed this trend looks set to continue for some time to come, and as such we can expect to see the longer term bullish trend extend well into the first quarter of next year.

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Copper future chart – December copper futures

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Tuesday, November 16th, 2010
copper futures price chart

Copper futures chart - 16th november 2010

December copper futures recovered some of the lost ground on Friday following the sharp sell off across the commodities sector, as rumours of a Chinese rate rise shocked the markets, which reacted violently to the possibility of a reduction in demand. Yesterday’s trading for copper was more positive, following the decision by the People’s Bank of China to keep interest rates on hold for the time being, despite the fundamental data last week which is pointing to rising inflation, raising the prospect of an economy that is beginning to overheat, and one which could have significant consequences around the world.

The feature of yesterday’s trading session was the support provided by the 14 day moving average, which helped the commodity close higher with a narrow spread up candle, and just failing to hold above the 9 day moving average at 394.75. Whilst the longer term outlook remains firmly bullish for the base metal, in the short term we need to see copper prices recover and hold above both the 9 and 14 day moving averages once again on the copper future chart, which would then place the December contract in a strong position to break above the 400 price point once more, and push towards the high of last week at 410. The 40 day moving average continues to point sharply higher to support this analysis.

From a fundamental perspective, copper remains one of the key materials in China’s economic recovery, and as such ( and much like soybean) the price of copper is extremely sensitive to any news, whether good or bad, eminating from China. However, despite the news last week, demand continues to remain very strong with the copper mines struggling to meet this demand, and until this dynamic changes, then copper prices are likely to continue higher for the foreseeable future. The recent short term recovery in the US dollar is adding some downwards pressure to commodity prices in general making exports more expensive as a result.

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Copper futures chart – 15th November 2010

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Sunday, November 14th, 2010
copper futures daily chart 15th november 2010

Copper futures - daily chart 15th November 2010

The commodity markets in general and copper futures in particular suffered a sharp sell off on Friday, as speculation increased that China will move it’s interest rates higher again, as it attempts to dampen the threat of inflation which is now becoming an increasing issue for the Chinese economy. As such the commodity markets pulled back on the prospect of reduced demand for crops, metals, energy and base metals such as copper, with the Thomson Reuters/ Jeffries CRB index falling 3.6 per cent on the day, it’s biggest fall since April 20th 2009. The speculation of a rate rise in China was fuelled by recent fundamental news, with both producer and consumer prices increasing, with the latter in particular surprising the commodity markets with a 4.4% gain from a year earlier in October, and it now seems likely that we will see a 0.25% rise in rates in due course.

Copper of course continues to remain the bell wether for base metals, and Friday’s steep move lower triggered other metals to follow suit, with the December copper futurs contract ending as a wide spread down candle, breaking below the psycholigical 400 level and closing just above the 14 day moving average which provided a platform of support as a result. This indicator is now key in the short term, and is doubly important as it currently sits at the 388 level, and therefore this price area should provide the requisite platform of support in due course. Any breach of the 14 day moving average may open the way for a test of the 40 day moving average in the 377 area, and provided this holds firm, then the longer term trend for copper should be re-established in due course. Despite Friday’s move lower, the longer term outlook for copper remains firmly bullish in my opinion, since the fundamentals of the market have changed little, with supply failing to meet demand, and despite the fact that China is the largest consumer of copper, Friday’s reaction to the news was over done, and as such we can expect to see commodities bounce back early this week.

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Copper Futures Analysis 10 Nov 2010

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Wednesday, November 10th, 2010
copper futures

Copper Futures 10 Nov 2010

Yesterday’s surge in the December copper futures contract saw the base metal break above the 400 price point before closing marginally below the 405 level as a wide spread up candle with a small wick to the lower body.  Following last week’s recovery and hold above all three moving averages, the bullish trend for copper has been firmly reinstated once again this week, as the commodity continues to climb higher as the technical and fundamental pictures combine to produce an almost perfect trading environment.  Having said that, this morning’s futures trading session has seen copper re-trace slightly to trade marginally below the 400 level at 398.25 at time of writing, but still well above both the 9 and 14 day moving averages.  Demand from China continues to grow for one major reason, other than as a base industrial material, namely as a major component of its future infrastructure.  In short with the economic prosperity now growing and drawing increasing numbers of Chinese into the cities, the demand for basic infrastructure such as electricity and telecommunications, is now growing exponentially with a consequent demand for the primary metal.  This demand can only increase putting further pressure on copper mines which are already running at full capacity, with the net result of driving copper prices ever higher.

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Copper futures extend bullish trend

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Monday, November 8th, 2010
copper futures chart

December copper futures - daily chart 8th November 2010

The December copper futures contract closed higher once again on Friday, ending the futures trading session with a relatively narrow spread up candle which built on the solid gains of Thursday, and closing the week just below the 395 price level. As such, Thursday proved to be a decisive day as we broke and held above the key 390 price level, which is now set to provide a platform of support for the next phase of the bullish trend. A further feature of Thursday’s trading session last week was the test of the 9 and 14 day moving averages which held firm during the down side probe , further confirming the positive sentiment for the commodity at present.

With all three short term moving averages pointing higher, and with the breakout now complete, we can expect to see a sustained move higher for copper futures as the upwards momentum is re-established once again. The fundamental picture also supports this analysis at present with sustained demand continuing to eminate from China, as the major copper mines struggle to meet this demand, pushing the base metal higher as a result.

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