September Copper - O 7140 H 7690 L 7125 C 7665 Chg. +505
Yes, you read that correctly, the market was up over 500 points! Copper screamed to
new recent highs on news that Phelps-Dodge is cutting back on production from its
higher-cost operations. The Hidalgo smelter in New Mexico is temporarily closing,
they are restructuring assets, suspending operations at facilities in the Philippines, and
selling a South African unit. Along with the BHP shut down, the bulls have had so
much to feed on that nothing has stood in their way. I couldn't have been more wrong
about my assessment the other day that the market looked overbought...that was over
600 points ago! With these shutdowns, the expected surplus that was foreseen earlier
in the year may not be as large now, but oversupply continues to exist. The
shutdowns are a law of supply and demand, when something gets so cheap, people
quite producing it, which eventually lowers supply, and subsequently raises prices.
The fed did raise rates 25 basis points but copper bulls don't seem to care about the
potential effects this may have on the dollar/yen, housing starts, etc. Japan announced
last week that production of rolled copper and alloy products was up 4% from the prior
year. Chinese refined copper cathode imports increased by over 250% through May, in
relation to the same period last year. Looking at the big picture, this rally over the last
few days does not negate the 2-year downtrend, but it is large enough so that if you
are a bear you better not hang on. The weekly charts show resistance near 7600. The
market is trading well above moving averages and there is a bullish seasonal in effect.
Prices don't lie and the market is in a bull move....don't stand in the way.
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