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Copper Likely to Forge Blowoff Top


After a new high for the move yesterday, the copper market reversed aggressively and with the lower low today, the market has likely forged a blowoff top. However, the selling yesterday might have been exaggerated by longs with profits on the month scrambling to the sidelines which in turn likely violated a series of chart support levels likely to spark waves of stop loss selling. We also suspect disappointing Chinese PMI data on Tuesday combined with a stronger dollar overnight and an extremely overbought spec positioning leaves the fundamental bias pointing down. Apparently, Chinese smelters are taking notice of the potential BHP/Anglo American merger as they fear battling a large competitor in their space. Overnight, the International Copper Study Group reduced its forecasted surplus for 2024 because of lower than expected copper production. Previously, the ICSG predicted a lofty 467,000 surplus of copper this year with the latest adjustment potentially signaling a nearly balanced 27 million ton global copper trade.

copper cylinders


The deck is stacked against the bull camps in gold and silver today, with an upside breakout in the dollar, signs of higher treasury yields, fear of a hawkish Federal Reserve statement, and a lack of support from Chinese and European buyers overnight due to the May Day holiday. However, the gold market should derive some underpin from World Gold Council projections of continued brisk global central bank purchases, and signs of positive gold demand from India and China. Unfortunately for the bull camp, the WGC expects Indian demand to soften in the short-term in the wake of the record surge in gold prices and strength in the dollar. Therefore, gold should generally find support eventually given supportive longer-term demand views and could find support instantly if the cease-fire deal in the Middle East is rejected by either party. Unfortunately for the bull camp, the charts remain severely damaged and the prospects of improving chances of a US rate cut from today’s Fed meeting are very low. In conclusion, the trade has nearly extracted the hope for rate cuts this year with residual inflation readings likely to keep the Fed firmly entrenched on the sidelines. However, today will bring the first wave of monthly US jobs related reports with two of the three jobs today expected to signal softening.


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Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

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