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Comex copper falls under the weight of stocks rise

NEW YORK: Comex copper ended lower under the bulging weight of LME warehouse stocks, which jumped dramatically on Monday and prompted funds to liquidate long positions.

Active Comex March copper ended down 1.65 cents at 85.65 cents a lb, trading between 85.60 and 87.00 cents. January and February also closed 1.65 cents lower at 85.00 cents and 85.15 cents, respectively.

"It's losing its traction. If one thing could be construed as a catalyst, it's the surprising stock increase," said one broker. "If we start selling off tomorrow, I think we'll start picking up some speed."

Floor traders said long liquidation by funds prompted the selling and arbitrage dealers were scale-down buyers. Volume was classified as decent.

One Comex trader said if the market makes new highs, funds will buy back their positions but otherwise, they will likely continue lightening their loads.

Fund selling and a lack of technical buying interest also pushed prices down in London trading. The stock rise stung the market which had anticipated the increase in a steady 5,000-6,000 tonne stream.

The 17,350-tonne increase in LME copper stocks, which pushed them to an all-time high of 803,225 tonnes, arrived in Hamburg and added to sentiment that supply is plentiful.

The three-months copper price slipped further during late inter-office trade, last indicated at $1,883/1,888 a tonne, off $8 from the afternoon kerb close.

"The bulls are not trying to claim that it was already in the price, which is what they usually do," said one copper merchant. "This time they had to admit they didn't expect it. It just happens to show that we are perhaps a little over exuberant at the moment."

Resistance levels are now pegged from 88.50 cents up to the 89.00-cent level for March delivery. support nearby is at 85.00, followed by 83.80 cents.

"It made a nice little top last week. Technically it looked overbought and I think it's just giving back some of its recent gains," said Scott Meyers, technical analyst with Pioneer Futures.

"The stock market looks a little weak today, copper prices are declining and that relationship is a normal relationship. The market should work its way a little bit lower, especially if the stock market remains weak."

The Dow Jones industrial average was down 156 points in late trading to 11,091, a 1.43-percent drop. The Standard & Poor's 500 index was down 1.03 percent, or 14 points, at 1,426. Increasing concerns over potential interest rate hikes began to pull down sentiment.

Final estimated volumes for copper reached 11,000 contracts Monday, comapred with official volumes of 8,495 contracts on Friday and 11,143 on Thursday.

The heady stock rise pushed the nine-day relative strength index for March copper down to 38. At the close of business Friday, the RSI had started retreating from overbought territory at 61.

Technical analysts usually interpret an RSI reading of 70 or higher as indicating overbought conditions and 30 or below as oversold.-Reuters