Good morning,
The dollar’s rally pausing yesterday provided support to our complex. Moreover, the metals have seen fast money systematic types establish shorts across the whole complex on those moves lower. Our data suggestive of that starting to cover in the likes of copper and lead. Indeed, noticeably the London open this morning has a marked lack of CTA selling resulting in some price gains on all.
The jury remains out as to whether this represents a sea change and a real turn. Prices on the likes of copper and ali having held the 50% retracements of their ytd ranges. The key now is whether they can meaningfully clear short term resistance levels such as 8 day mas on this bounce. Our pool of participants so reduced post the recent risk reduction we feel it will be price and those gains that will draw length back into the complex. Whether you want to call that FOMO or stop ins.
Overall, we remain bulls. Plenty of synthetic shorts in the physical world where all are living on a hand to mouth basis! And we make this comment : supply led rallies which is what 2024 has been all about are always likely to be more tricky to navigate than demand led ones.
US being out for Juneteenth might see further draw on liquidity this afternoon. And we have been noting the heavier footprint left by HFT flows.
Price performance at cob 18th June 2024:
Ali
- Last few days the lower price has uncovered some evidence of a consumer bid in the front.
- Price holding the 50% retrace of the YTD range.
- Some gamma interest with Sep call buy interest in the options market yday.
- Light turnover this morning. A $36 intraday range traded which has not achieved any of its ATRs just yet.
- LME ali seeing long liquidation prog continues and its net combined reading remained in the negative territory for the 5th consec session but with a lighter supply reading.
- Most of the downstream operating rates have slowed down in May (not so positive) bar China ali ingot seeing a further pick up. It is not surprising if we consider the off-season is around the corner.
- China ali profile operating rate for the large producers also seeing a decline in June but following its seasonality.
- Both SHFE and LME on warrant stocks seeing stocks draws whilst COMEX stocks remained flatlining at 39.4kt.
- Support into $2475 area a break below which would open up potential for $2400.
- Resistance into 8 day ma at $2532 then $2575/2600.
Copper
- Dollar showing some weakness this morning and that has helped our complex bounce..
- The leveraged fund’s net dollar position seeing the long adding prog after few weeks long liquidation.
- July Sep comex spread also going bid yesterday afternoon. That backwardation increasing again this morning. Out to $7.40 back at its peak from $4b settle last night.
- COMEX stocks continuing to draw whilst LME continues to see further builds.
- China copper output totaled at 1.098 million tons, increased 0.6% yoy.
- China copper smelting and refinery operating rate total at 88.5% in May seeing a pick up from the low in Feb’s low at 83.8%.
- See how LME copper’s long liquidation momentum slowed down and the fast money’s short positions seeing some covering.
- Shanghai aggregate open interest down 1.4k lots or 0.3% for the 4th consec session. Long liq continues but has slowed down.
- Weekly profile seeing the largest bar traded into $9650 area and most of the volume still sit along the downside.
- Price has breached its 8 day ma at $9782 as it did also on the 12th June.
- Dollar is now key.
- Resistance above into $9851 high from 14th June and then $9925/50,
- Yday options market saw August straddle granting. That party granting counting on a range environment.
- Support into $9500/50 now.
- Looking at weekly you would note that since price settled $9762.50 on Friday 7th June we have essentially been unchanged.
Nickel
- Rallied into today’s Shanghai close and we could make an argument that this is the first time we have not seen price pressure around this time since 4th June.
- Onshore stainless price steadied up into its settle.
- LME continues to see short adding prog and the fast money still build up its shorts.
- Shanghai aggregate open interest down 1.2k lots or 0.6% for the 2nd consec session.
- Onshore renewable energy equity index all seeing further sell off which brought some downward pressure to price.
- SHFE on warrant stocks seeing further draws whilst LME nickel stocks noticed a small build.
- Both nickel sulfate and nickel pig iron prices under pressure of late, which is not supportive to nickel prices.
- But nickel turnover is light and this observation is more about the absence of a CTA offer this morning?
- Price holding shallow trend line from $16,205 on 19th Feb.
- 8 day ma comes in at $17,640. That tying in with the 4 and 10 day atrs ($415 and $482) and today’s session low of $17,200.
Zinc
- Price was bid overnight with a systematic bid emerging since the London open.
- LME zinc long liquidation has also slowed down with the fast money short beginning to cover.
- Shanghai aggregate open interest up 4.9k lots or 2.6%. Fresh length.
- China zinc concentrate producer operating rate declined to 70% in May from the previous high in April at 71.2%.
- Both LME and SHFE on warrant seeing stock withdraws but minimally.
- Ferrous and steel prices seeing some sell off overnight which slowed the zinc gains.
- Resistance into $2900/10. High from 23rd June up to 38.2% retracement. Then the 21 day ma at $2936.
- Support into $2830/40 basis the 8 day ma and yesterday’s settle. Then $2800.
Lead
- Today’s outperformer, turnover is running up 166% on its 20d average and a $55 intraday range traded which has achieved all its ATRs.
- SHFE oi seeing a sharp jump, up 37.1k lots or 20.8% to the highest level on the record. This could be a warning for a turn… Onshore participants still building up its long positions into SHFE contract owing to the recent tightness of lead supply.
- SHFE lead has been leading the strength.
- Shanghai July Aug spread bid to 105 back this morning, tightening up from the low on 12th June at 5 backwardations. Now it is approaching the previous high on 21st May at 120 back.
- On top of this, see how the fast money’s short start to cover on LME from our net spec estimate.
- LME lead on warrant stocks increased since 5th June at low 145kt to 202kt as of today. SHFE on warrant stocks seeing a big draw today after continuous builds between 7th - 18th June.
- Price has touched its 21 dat ma at $2243 below which it has been trading since 4th June and break back below $2275 area. Resistance into those 2 spots now.
- Support into $2200.
Macro
- 12:00hrs MBA Mortgage Applications
- 15:00hrs NAHB Housing Market Index
LME Stocks
Shanghai On Warrant Stocks
* For indicative purposes only, as at 09:45 UK time. Please contact the desk for live pricing
