Commodities | Oct 20 2011
“The last time we saw this amount of cancellations the metals had a US60c rally” From last week the market continues to trade higher and we are US17c shy of US360c which is the target in the run up.
News during the week that Chinese stocks stood at 1.93million tons failed to shake the market although it was a major surprise for all. This is more than the annual consumption of copper for the US. As China is the number one consumer of the metal in the world we tend to monitor the imports and inventory levels closely. Imports continue to rise and for September they expanded by 11.8 % to 16 month high and with stock levels so high we have to question what China is doing with the metal when the economy is cooling?
After a little research it was not too difficult to find the reason for the stock piling. The Chinese government is upgrading its entire power grid and as 48.5% of total consumption of copper is currently going into the grid the US45 billion country upgrade is going to absorb an awful lot of copper. So put simply we can expect China to remain on the bid for some time to come. It is interesting that they are not chasing the price however happy to sit back and let the maker come to them; prudent trading.
Although we feel we are sidelined until Sarkozy and Merkel’s plan is on the table we feel that the metal is well supported on the dip. And remain bullish.
Chart point:
As we can see from the chart below copper remain in a tight range consolidating the move from US 299. The current range is US 300 to US 345. We can expect to see this consolidation continue as the market looks to gather momentum for a test higher, US 360 remains our target. Momentum indicators look a little high as well so expect more sideways price action to come.
Resistance stands at US 335 then US345 and support stands at US320.
We continue to see any rally at the moment as a bull move in an overall bear market.
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