The bullish backdrop in both the supply and demand fundamentals for the two arenas that matter most – Chilean output and Chinese usage, as illustrated – have not inspired any strength in prices. Mixed statements from the Fed have caused speculation that a tapering of QE is a possibility. That has sparked a correction in the equity markets and rising interest rates, which seem to have been more influential on copper prices than the tepid bullish fundamentals.
The other base metal markets have been weak as well, most notably nickel, which sank to a four-year low (Chart 4), providing confirmation, perhaps, that global demand for industrial materials has not followed the modest recovery in global economies. The shorts are tired, which neutralizes the threat of short-covering rallies. Chart 5 indicates fairly clearly that funds have covered the lion’s share of their shorts.
July copper came within a smidgeon of our $3.45-per-pound stop, recommended on May 14. We remain steadfastly bearish. Maintain short positions.