Copper & Platinum Weekly Update

Jordan Roy-Byrne, CMT

Copper

As we pen this, the May contract, the most heavily traded futures contract, is down by about 1.5%. Once again, Copper failed to close the week above 340. Note that seven times in the last 12 weeks, Copper has traded above 340 but has never closed a single week above 340. Copper inventories as per the London Metal Exchange, declined in the last week, which continues a trend that has persisted for about five weeks. Meanwhile the US Dollar has strengthened in the past week, which reduces the appeal of hard assets.

Technicals lead fundamentals and that is why we need to pay attention at this juncture. The probability is high that we won’t see a weekly close above 340 anytime soon. If we do get one, your humble analyst doubts it will be sustained. Looking further out, the market could consolidate in a triangle pattern. The next move could be down to support at 310.

The COT data is not supportive of the bulls but it isn’t as bearish as it was back in January. Since that time, commercial short positions and open interest have declined. The commercials are modestly net short. Assuming 340 continues to hold as resistance, then the weight of the evidence argues for consolidation.

Platinum

As we go to press, the April contract is down by 1% and change. About two weeks ago we said that a weekly close above 1600 would usher in a retest of the January high at 1653. The market started last week with a rally that came within a whisker of 1650. However, the market closed the week with a reversal candle. Thus far this week we see continuation to the downside.

We are at a juncture when technical evidence is arguing that this could be the end to the tremendous rebound. Note that Copper’s latest rebound peaked four weeks ago, while Platinum peaked last week. As far as the commodities complex (excluding Gold & Silver), Copper has been a leading indicator and Platinum a lagging indicator. So recent failure in Platinum could be confirming Copper’s failure.  First support is at 1550 and second support is 1475-1500.

Furthermore, the COT data is presenting more headwinds for bulls. I looked through the past 15 years and open interest is now at a 15-year high while commercial short positions are within a whisker of a 15-year high. Unless the market can battle back and close near 1600, then we have to assume a failure is in place.