Today's Spotlight Market

Copper futures have felt a bit of selling pressure recently, brought on by outside market weakness and technically overbought conditions. Fundamentally, the market remains relatively tight. The LME saw a reduction in Copper inventories of 425 tons this morning, as well as a 1.1% increase in bookings to remove metals from warehouses. The People's Bank of China obliged traders and offered another massive wave of stimulus, which can be seen as having a positive impact on commodity prices.

Fundamentals

Copper futures have followed precious metals and energies lower in recent sessions, driven by economic fears. Some Copper traders are hoping that the decline in Chinese corporate earnings will prompt the government to take more aggressive action. In addition to further stimulus, the Copper market may find support from Chinese infrastructure spending. The economic chaos in Europe, which has led to violence over austerity measures, may limit the upside of the Copper market.

Technical Notes

Turning to the chart, we see the December Copper contract failing to break through the 3.85 level, and prices have subsequently pulled back. Yesterday's low is near the 20-day moving average. It is important that prices remain above the average or they risk losing momentum. Prior to pulling back, the RSI had reached the high 80's, which can be seen as overbought and likely contributed to the pullback. The RSI is now back in neutral territory, suggesting some buyers may once again step in. In addition to 3.85, the 3.925 area can be seen as resistance. On the downside, support may be found at 3.60.


Rob Kurzatkowski, Senior Commodity Analyst

This article appears as part of a content sharing arrangement with optionsXpress.

Free Practice Trading at optionsXpress