Tuesday, July 25, 2023

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.

Anyhoo, in 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....

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:

TradingView Chart

CME/COMEX most active September contract

So what now?

I have no idea. Probably a bit higher and then we pounce. Like the panther.

Biding our time, like the panther waiting....just a little bit closer and....
Okay, maybe not really waiting to pounce, maybe waiting for something to land within a few inches.
So I don't over-exert myself: