Daily September High Grade Copper

Comex High Grade Copper Futures Analysis – June 24, 2013

September High Grade Copper futures failed to confirm Friday’s closing price reversal bottom, sending the market sharply lower. The lack of follow-through to the upside was a reaction to the news that China was going through a cash crisis. Besides an expected slowdown in demand, investors now have to deal with the possibility of another credit crisis.

Sure it’s a little early to talk about China’s cash problems spreading outside of its boundaries, but investors that went through the credit lock up in 2007 would rather take action first and ask questions later. Although the market took out Friday’s low, it did not close on its low, suggesting that perhaps even short sellers are a little nervous about holding a position in a weak market.

The clash between the potentially bearish fundamentals and the oversold technical conditions could produce volatile trading over the near-term. The inability to drive this market lower into the close coupled with Friday’s reversal bottom are strong signs that there may be a buyer in the market at current price levels.

Daily September High Grade Copper
Daily September High Grade Copper

Without a reversal bottom, traders are going to have to wait for a shift in momentum to trigger the start of a short-covering rally. Taking out today’s high at 3.1000 will be a strong sign that momentum is shifting. This will be an important signal because the market has posted a series of lower-tops and lower-bottom since reaching a top at 3.4125 on June 5. It won’t be until the market takes out a downtrending Gann angle at 3.1525, however, before anyone can get excited about the long side.

This last round of selling pressure was triggered by the possibility the Fed will begin tapering its aggressive bond-buying stimulus program as early as September. This news has driven up interest rates and consequently the U.S. Dollar, making copper more expensive for foreign buyers. Today’s sell-off was triggered by a possible cash crisis in China.

If conditions improve in China, then coupled with oversold conditions, the market may be setting up for a solid short-covering rally.  A bottom in stocks and bonds paired with a top in the dollar may be enough to fuel the start of a decent correction. 

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James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.

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