Slides in many equity indexes are showing a return to slowing economic conditions. Slowing numbers out of EU add to that sentiment. Precious metals may be returning to a “flight-to-quality” role with the inverse relationship with equities returning. Grain markets have some critical numbers this morning with focus on tightening supplies and concerns about ongoing demand.
Tag Archives: Copper
Weakness to Start the Day and not Much Confidence
Meetings of the G20, IMF and World Bank gave a lift to equities overnight, but quickly eroded. Most physical commodities are weak and we would expect that to continue until some positive and convincing news on how to handle the EU and US situations surfaces.
Little More Optimism In The Marketplace
Better than expected Durable Goods reading which had eased the recession fears. but far from an “all clear.” Markets continue to look forward to the comments from Jackson Hole at the end of the week.
After Downgrade, New Opportunities
Below is an excerpt from The Hightower Report’s most recent Special Report. To receive access the full story, with trade strategies, along with our daily coverage of 16 markets, visit futures-research.com for your free 2 week trial!
Part of the market’s malaise since August 1st came as a result of bickering in Washington over whether to raise the US debt ceiling, but it also came from the European debt debacle, the S&P downgrade of the US credit rating and the cycle of poor economic data from around the globe. However, it is possible that the 17.5% plunge in the September S&P 500, the $23 decline in crude oil prices, the 37 basis point drop in 10-Year Note yields and the 16% drop in copper prices in just 7 trading sessions could have been an overreaction.
True, many players are disgusted with gridlock in Washington over raising the US debt ceiling, a primary factor behind the downgrade of the coveted triple-A rating. Many have lost trust in Congress and in turn have voted by selling the market. This sell-off, which has occurred across most markets, reflects concerns over an economic slowdown, but certain commodities market might have already factored in sustained slowing and the lack of clarity about the US and Euro zone debt problems.
In our opinion, commodities are and will continue to be less responsive to the downturn in the economy than other instruments. We also think that certain commodity markets will be able to turn back up with only minimal evidence of an economic recovery and certainly in the event that spending cuts are found by the Super Committee.
Therefore, the markets are in need of a catalyst, a measure of support or surprise to help shift sentiment from the “sky is falling” view to one of “hope”. Factors that could turn the tide include:
- Super Committee progress on budget cuts,
- Signs that a US Tax Code overhaul is possible,
- Further support from US Fed (QE3),
- Signs that the US economy has retained positive momentum.
No Sign of a Fundamental Bottom Yet – Look to the Technicals for Timing
In looking at a chart of the speculator positioning in a composite of a physical commodity markets, it is clear that a significant portion of the net long position in non financial commodities was liquidated in the April through July decline. Our estimate is that the close on August 10th put the net spec and fund long of non financial commodities at 1.2 million contracts, which closely equates to the reading that was posted the week of July 5th. The current positioning also appears to relate fairly well to the reading that was posted on July 27th of 2010. Therefore, we see the commodity markets sitting at a fairly critical pivot point or value zone. To see even lower prices ahead might require a broader acceptance of a “return to recession” mentality in the US.
With the Continuous Commodity Index having fallen to a fresh new low for the move as of August 10th and reaching its lowest level since early January, we suggest that traders remain negative towards those markets that have classically bearish fundamentals, like sugar, cattle and soybeans. At the same time they should wait until the fundamentally bullish markets like copper, corn, crude oil, hogs and platinum reach down to solid chart support levels before establishing long positions in them.
Full Report with Trading Strategies
Please sign-up for your free trial. Existing Customers: sign-in
Copper: Bull Market Needing a Technical & Fundamental Balancing
Below is an excerpt from The Hightower Report’s most recent Newsletter. To receive access to this story, with trade strategies, and our daily coverage of 16 markets, visit futures-research.com for your free 2 week trial!
The copper market demonstrated an ability to discount negative fundamental developments over the last 2 1/2 months, as rising Shanghai copper stocks, disappointing US employment readings and general strength in the US Dollar were unable to discourage nearby copper prices from forging a surprising rally of 63 cents per pound! Some players suggested that copper was simply looking forward to improved Chinese demand in the second half of the year, while others suggested that the range-up action was a sign that global economic sentiment was destined to hold together despite the travails in the US and Europe and ongoing Chinese tightening. While we think that September copper prices north of the $4.50 level are too expensive for the near term, we suspect that September copper prices will manage fresh new contract highs before that contract goes off the board. In the meantime, a slightly overbought technical condition and news of a January through May world copper surplus of 74,000 tons from the World Bureau of Mineral Statistics could increase the need for a correction back toward the middle of the last 7 months’ trading range. In fact, we think the COT reports as of July 19th (to be released after this writing) will probably show the non-commercial and non-reportable combined spec net long positioning to be near its highest level of the last two years. That alone could set the table for a normal correction off the May through July rally, down to $4.2575 in September copper.
In short, we see copper as a bull market in need of a technical and fundamental balancing, with the fundamental balancing potentially set to unfold shortly after the initial euphoria from a US debt deal and into the next US monthly payroll report in early August. On the other hand, sentiment toward Chinese demand for copper and residual supply side problems might help to cushion September copper in a late July correction, and that in turn might mean that September copper will manage to respect closer-in support at $4.3370.
Suggested Trading Strategy: Trading strategies are available to our customers and trial users of our Research Center. Please sign-in or sign-up for your free trial.
Weak US Numbers Continue; More Unrest in Egypt
Mixed bag for commodities overnight. US Dollar is lower. Shanghai copper stocks were down which may indicate continued demand. A second round of protests in Egypt. An announcement from the G8 stated the world seems to be entering a self-sustaining growth pattern. The comes during a week of less-than great US numbers. US weather may be going from a bad cold-and-wet pattern to a potentially worse sustained hot-and-dry pattern.
Copper: Up Overnight and Reached Highest Levels Since March 7th
Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
The copper market has also managed a range up extension move overnight and in the process copper prices reached the highest level since March 7th. In addition to a sharply lower US Dollar and rising equity prices, the copper market also saw a rather noted weekly decline in Shanghai copper stocks and that hints at decent demand news coming from China. The copper market was also lifted by talk that scrap copper imports into China were set to rise in the coming weeks, as that also hints at improving demand in a key copper market consumption zone.
Apparently the copper market isn’t undermined by the prospect of a US government shut down, nor is the market concerned about the latest rise in LME daily copper stocks. LME Copper Stocks were 444,175 tons up 1,800 tons. LME Copper Stocks were at the highest levels since 07/05/2010. LME Copper stocks have increased 14 of the last 20 days. However, Shanghai weekly Deliverable Stocks were 154,229 tons down 12,687 tons.
Copper: Another New High for Move; May Need Positive ISM
Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
The copper market has managed another new high for the move overnight despite some slightly softer than expected Chinese economic readings. Perhaps hot inflation readings in China provided copper with some support overnight, as copper also saw signs of increasing copper production from Poland overnight.
While copper prices are positive in the early action today, the market might need to see something positive from the US ISM manufacturing readings to offset the softer Chinese manufacturing readings as those readings obviously backed off from the breakneck growth pace seen at the beginning of last year.
While LME copper stocks posted another rise overnight, the magnitude of the rise (+750 tons) wasn’t overly significant and that could allow weakness in the Dollar and US scheduled data to dominate the copper trade today.
Copper: Remains Under Pressure and Global Economic Uncertainty Not Helping
Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
The copper market remains under pressure as the uncertainty in the global economy is not doing any favors to industrial commodity markets like copper. While the copper market continues to fear excess tightening from China and a softening of Chinese copper demand, calls to battle inflation, predictions of stagflation and residual concern for the pace of the US economy all seem to leave the bear camp in copper with more evidence than the bull camp.
Another rise in copper exchange stocks overnight is starting to give off the impression of a trend, as LME Copper Stocks were pegged at 407,200 tons for another gain of 1,400 tons. LME Copper Stocks are now at the highest levels since 08/13/2010. LME Copper stocks have also increased in 13 of the last 20 days. The market was also presented with news of higher physical copper production from a Canadian miner, but the copper market hasn’t paid that much attention lately to minor changes in supply.
Commodity Outlook – 2012.01.23
by Dave Hightower on January 21, 2012
Below is an excerpt from The Hightower Report’s most recent Newsletter. To receive access to this story, with trade strategies, and our daily coverage of 16 markets, visit futures-research.com for your free 2 week trial!
So far, 2012 has seen a better than expected chain of events than might have been expected at the end of 2011, as Euro zone fears have tempered slightly, there have been indications that China could be in the process of shifting away from a tightening stance, and US economic activity has continued to give off signs of forward progress. Certainly the floating of surging European debt will be a long, drawn out affair that could at any time serve to yank the rug out from under the markets, but so far the take-down of their debt has gone favorably. It is possible that the markets are starting to settle on the idea that Greece might be allowed to fail and in turn be forced from the EU. While that event will most certainly foster significant volatility, it could end up being the de facto end of the Euro crisis. On the other hand, with even a moderate improvement in macroeconomic conditions in the Euro zone, it could become increasingly more difficult to spark full-blown anxiety events, and that more than anything could speed the crisis toward a favorable outcome. Recent suggestions from the US Fed seem to indicate that the US will remain supportive of the global economy, even in the face of improvement in the job market and, more surprisingly, even in the face of an increase in near term inflationary pressures. In other words, some members of the US Fed are acknowledging the severity of the Euro zone crisis, and they are apparently willing to increase the risk of inflation pressures in the US in order to facilitate a return to global stability.
So far, 2012 has seen a better than expected chain of events than might have been expected at the end of 2011, as Euro zone fears have tempered slightly, there have been indications that China could be in the process of shifting away from a tightening stance, and US economic activity has continued to give off signs of forward progress. Certainly the floating of surging European debt will be a long, drawn out affair that could at any time serve to yank the rug out from under the markets, but so far the take-down of their debt has gone favorably. It is possible that the markets are starting to settle on the idea that Greece might be allowed to fail and in turn be forced from the EU. While that event will most certainly foster significant volatility, it could end up being the de facto end of the Euro crisis. On the other hand, with even a moderate improvement in macroeconomic conditions in the Euro zone, it could become increasingly more difficult to spark full-blown anxiety events, and that more than anything could speed the crisis toward a favorable outcome. Recent suggestions from the US Fed seem to indicate that the US will remain supportive of the global economy, even in the face of improvement in the job market and, more surprisingly, even in the face of an increase in near term inflationary pressures. In other words, some members of the US Fed are acknowledging the severity of the Euro zone crisis, and they are apparently willing to increase the risk of inflation pressures in the US in order to facilitate a return to global stability.
From a physical commodity market perspective, it might not take much forward movement in the global economy to see many commodity prices rally in 2012. We would suggest that commodity markets in general have already seen a healthy liquidation of speculative long positions (as can be seen in a chart of the composite non-commercial and nonreportable net long positions for non-financial commodities). Therefore, we think that the risk to longs in markets like silver, copper, platinum, rice, cocoa, natural gas, and soybean meal might be somewhat limited in the months ahead.
Traders should not underestimate how important China is to several physical commodity markets. In addition to their possible shift to an easier monetary policy stance, China will also have a noted impact on commodity markets that receive fresh demand from restocking efforts. Those include corn, soybeans, sugar, cotton, copper and pork. In the near term, the best leading indicator for many commodities might be the action in the Shanghai stock market, which appears to have managed a bottom with the action in early January. If the equity market action isn’t convincing enough to declare a turn up in the Chinese economy, one might simply look back to China’s four record monthly coal import readings over the last year as evidence that their economy has retained its capacity for forward motion.