strongest chart in history of markets

Discussion in 'Commodity Futures' started by silk, Dec 21, 2009.

  1. silk


    Strongest chart i've ever seen is the chart of copper inventories. Up every single day for months.

    The next strongest chart is the chart of copper price itself. As inventories go up, copper price never falls. Though has stopped going up as fast.

    I've been short copper for about a month now and am down just a few cents.
  2. Tide31


    -too short a timeframe. Like to see a couple years. Building in the northern half of the country grinds to an essential halt from Thanksgiving to Easter no? This may be a normal occurence. Copper should fall with the dolllars rise too. FCX down from ~ $87 to ~ $76 in that same timeframe. Altough admittedly I am not a big follower of mineral resource stocks. Maybe someone could shed some light if this is an expected buildup, or has FCX just come off as dollar rises?
  3. silk


    Stunning increase in copper inventories. Above 500k tons. Highest end of year close in inventories since 2002 when copper was 90 cents.

    Amazing copper just drifts upward every day. As inventories grow larger and larger.

    Inventories up for 43rd day. Worldwide inventories now at a record. No demand seen any time soon. But yet copper price is closing at highest (or right at 2008 close) end of year closing price ever.

    I don't really get it.
  4. The economy has been recovering, and people expect higher demand in 2010 - pretty simple. Clearly those in the markets think this outweighs the current build-up of inventories.

    You may ultimately be right, but if people expect further growth then the price can go up for quite a while before reality bites. This is pretty common and normal behaviour in markets, so I'm surprised that you are surprised.
  5. Metals and Oil are high just because the USD inflationary policy, no because of the logical market forces, that's all.

    In may 2010 many of the commercial real estate loans will reach their refinance dates. This will be bigger than the housing crisis.

    What has been lost in the housing talk recovery is the grim statistics that commercial real estate has fallen 37 percent in value in the last year. This wouldn’t be such a big problem aside from the tiny detail that some $3 trillion in commercial real estate loans are still outstanding. The commercial real estate debacle is already happening with defaults reaching 16 year highs. In some instances banks are simply ignoring non-payment and giving borrowers a few more months or even years.

    So we can expect a Big crash in metals, energies and the financial markets in 2011 or early 2012.

  6. silk


    went ahead and went all in on copper short. My AVG is about $3.23. First shorts were 3.12 and 3.09.

    Time for this chart to visit somewhere near the lower bollinger band just under $3.00.
  7. I like to track the market analists that are being interviewed by Bloomberg on the metals market. The result is a great picture of an ongoing narrative of which purpose it is to rationalize why prices are where they are.

    If you read through this narrative it becomes clear that expectancies for copper were bearish in late November and early December based on the gaining dollar. Being reminded the hard way that "correlation does not equal causation" and that commodities do not necessarily respond in a given way when the dollar rises against other currencies our analists have now switched to being bullish. Their rationalization now is that "funds are buying". The "funds" here remain unidentified but it's probably now becoming fashionable among pension fund managers or something to speculate in copper. The rationalization "funds are buying" is rather amusing I think because they use it to base their forecasts on. It makes it sound as if they think that "funds" will buy and keep buying ad infinitum.

    Looking at the copper market the explanation is probably true though. The divergence between the net short and long positions of commercials and non-commercials in the copper markets is at the same level as it was at the top of the copper market in 2008. Non-commercials here being net long and commercials being net short.

    Meanwhile stockpiles have been rising continuously. Not just in copper, but in all the base metals. Aluminum stocks are more than four times the size they were a year ago for example.

    It's even gotten to the point where copper refiners in China are starting to export the metal in order to take advantage of higher prices on the LME. This is a complete reversal of the situation as it was in 2008, where Chinese prices fetched a premium over LME prices.

    All of this points towards a speculative bubble that has developed in the copper market. I see no justification for copper trading at more than two times it's average production cost when increasing stocks tell me that there is plenty of supply to go around and production increases ensure me that this will be the case for the forseeable future.
  8. And since everyone involved in copper already knows this, price can only go higher, correct?
  9. I`m pretty sure that I read back in October that Red Kite (biggest metals hedge fund with the biggest copper trader in the world) is giving a dim forecast of copper and it sounds like they are short and plan to be for a while.. at least a few years.
  10. Commodities and metals in particular have reversed this week. In the next four weeks I think we'll see a sharp correction.

    Markets are reflexive which means that price trends reinforce themselves. Though at some point prices diverge too much with industrial reality and are no longer supported and sentiment changes quickly. You'll know sentiment is ripe for a changeover when the buying of "funds" is used as a base on which to forecast higher copper prices.
    #10     Jan 9, 2010