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The copper market was clearly fundamentally overbought into last week’s highs. In fact, demand expectations for copper were seemingly at direct odds with reality and therefore the sharp reversal this morning in prices, seems fully justified. With renewed fears of a noted downsizing of the US auto sector again one gets the impression that US demand for copper is, for the time being, more than capable of offsetting the anticipated demand from China. Just to add to the negative tilt this morning, is news of higher Zambian copper production predictions for 2009. Also adding into the negative tilt for copper prices is the fact that the US Dollar strength is prompting pressure in a host of physical commodity markets. While the March 24th Commitment of Traders with Options report for Copper showed the Non-commercial position to be net short 18,639 contracts, with the Non-reportable position net long 2,542 contracts, and that made the “combined” spec and fund position net short 16,097 contracts as of early last week, we doubt that the technical condition of the copper market is capable of countervailing the distinctly bearish fundamental setup in the marketplace. In looking at other news flow this morning, the market was presented with evidence of rising Japanese copper export data and perhaps Chinese demand forecasts that failed to live up to recent bullish expectations. Therefore, the path of least resistance in copper prices today is pointing downward, with the 1.7500 level initial support, but a slide down to 1.7080 would also seem possible when one considers all the negatives facing the copper market today.
