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Comex May copper dips after technical selloff

NEW YORK: Comex copper futures finished lower Monday as edgy technically-based liquidation pressured the market on the heels of Tiger Management's shuttering of its six hedge funds, traders and analysts said.

Copper fell amid stop loss selling and arbitrage early in the session after the London Metal Exchange (LME) three-months price dipped under trend line support at $1,759 a tonne. The New York market later rebounded slightly in the afternoon amid scattered trade support.

"We saw a little arbitrage selling pushing us lower, but no major funds" were involved in today's trading, a Comex trader said.

Active May copper slipped 0.25 cent to 80.25 cents a lb, trading 78.80 to 80.30 cents, nearby July lost the same to rest at 80.90 cents and the rest fell 0.25 to 0.30 cent.

Floor sources said Tiger's funds had likely liquidated any remaining copper positions before last week, but smaller funds were seen whittling long positions as early as Thursday when reports circulated among Comex and LME dealers.

Most analysts estimated that Tiger had not held copper positions in the last three or four years, but a company spokesman would not comment on the nature of Tiger's positions.

David Meger, metals analyst at Alaron Trading, said Monday's market was squeezed by a combination of negative technicals and doubts of sustainable demand in copper.

"Recent activity shows that the physical market seems to be supportive of higher prices...but not enough to drive the market up through the 83 to 84-cent level," Meger said.

Market participants remained concerned whether current levels of strong demand can be sustained in the volatile copper market, according to Meger.

"Basically, copper is caught between a rock and a hard place because, on the one hand, there is strong industrial demand, but players are still concerned about rising inflation and interest rates," he said.

Meger pegged near-term support in May copper at 78 cents a lb, adding that "one would expect some large technical sell programmes to be initiated on any move below 78 cents, where we would achieve stops," he said.

In London, three-months copper finished at $1,756 a tonne, down $8 from Friday's afternoon close.

LME warehouse stocks were down 2,800 metric tonnes to 755,175 tonnes, and Comex stocks were unchanged at 95,852 short tons in Friday's report.

Final estimated volumes for Comex copper reached 12,000 contracts, against the official tally of 8,594 lots previously.

The nine-day relative strength index (RSI) for May copper dropped to 35 on Monday, compared to 41 previously.

Technical analysts have said that an RSI reading of 70 or higher usually indicates a market is overbought, while 30 or lower means it is oversold. -Reuters