Sunday, August 13, 2023

Copper Trades At Lowest In A Month

That was lucky.

Doing this stuff out in public, real time, gives one so, so many opportunities to prove-up the reader's suspicions that yes, one is indeed a moron.

So in an attempt to mitigate that exposure we  try to simplify things. Directional bets, on the assumption that our readers can put together their own combinations or pair trades or derivative exotica. And sometimes it works.

From July 18's "Real Estate: China Evergrande Reports Very Large Loss, Auditors Give Going Concern Heads-Up" we exited by saying:

When something gets announced, copper will pop higher which will offer a short opportunity....

Reiterated in July 25's "China and Copper: Now Comes The Tricky Part": 

There may be a misunderstanding among copper speculators as to what China's Politburo intends to do to support/stimulate China's economy. I say "may" because if you start screaming from the rooftops that the market is wrong, the market is apt to show you that no matter how big your bankroll is, being early looks like being wrong to your margin clerk.

Or, as the head of one of the world's largest commodity traders said about the Hunt brothers as the bros were cornering the silver market: "Those boys don't know what deep pockets are."

At the time, the various branches of the hilariously complicated Hunt family tree were the richest family in the U.S. and probably the world.

So we try to avoid saying "The market's wrong." It's just that the Chinese government has no intention of financing new construction in the property sector, where the bulk of Chinese copper usage has occurred since Deng  Xiaoping decided to lift a half-billion Chinese out of poverty.

No, the Politburo will work to keep the property sector collapse from infecting the rest of the economy but that doesn't increase demand for copper. At best it holds-off the demolition of those 90 million 30 million empty apartments and keeps that somewhat surprisingly large supply of copper pipe and wiring from coming onto the market....

....Well, something has (sort of) been announced:

Bloomberg - "China’s ‘Dovish’ Politburo Signals Rate Cuts, Property Easing

Bloomberg - "China Developers Jump Most in Seven Months on Politburo Pledge"

And sure enough copper is moving, up 6.45 cents today and 9 cents since the settle on July 18...
...So what now?
I have no idea. Probably a bit higher and then we pounce. Like the panther.
Sure enough, the futures did indeed move a bit higher, to 402.15 on July 31 and now 13 days later, to 3.6930:
TradingView Chart

And this is where it gets very interesting. Because we are now just a few ticks above the point where enough buying came in to arrest the slide in late June, at 3.6880. [June 29]
I for one am getting very interested in the strength of the dollar as a catalyst for further downside.
As we've been saying since last year, the supply/demand picture is almost perfectly balanced so the red one is moving inversely to the dollar and perversely on rumors of loosening in Beijing.
What a time to be alive.