Tuesday, April 23, 2013

Market Analysis: Copper

As I noted on April 2, the copper market is weak.  In general, we're dealing with a situation of over-supply and diminished demand.  Now, with more confirmation that China is indeed slowing, we can expect further weakness in this commodity. 

The latest supply information is bearish:

Shipments of refined copper into China in March dropped 37 percent from a year earlier, customs figures showed today. Purchases of previously owned houses slid 0.6 percent to a 4.92 million annual rate last month, figures from the National Association of Realtors showed today. That trailed the 5 million rate projected in a Bloomberg survey of economists. 

In the April post, I noted that on the weekly chart, copper had broken technical support of a triangle consolidation pattern.  That trend has continued:

The chart above is a weekly copper chart.
  • The blue arrow is from earlier this month.  
  • The red arrow shows that prices have continued to move lower.
  • All the shorter EMAs are moving lower, with the shortest below the longest
  • Prices are below the 200 week EMA
  • Momentum is dropping and negative
  • the CMF is negative

Above is a daily copper chart.
  • The big area of support was at ~41-42.  Once prices broke that level, they dropped hard
  • Prices are at/near a one year low
  • All the shorter EMAs are moving lower, with the shorter below the longer
  • Prices are below the 200 day EMA
  • Momentum is negative and has given a sell-signal
  • The CMF has turned positive, indicating we might be seeing some bottom fishing.