classic head and shoulders but, page-19

I think as per usual the guys at Leapfrog got it right....zinc looks stuffed short-term....

http://www.leapfrog.it/zinc.html

October 29, 2007

Zinc currently presents somewhat of a conundrum for analysts and investors alike. Over the past two months we have seen the LME price fall by 7-8%, whilst the Shanghai price has fallen by about 4% over the same period and whereby the gap between LME and Shanghai prices has now blown out to a 18.67% differential in favour of the LME.

As a result, available Singapore stocks have fallen -78.15% to historic lows at 1775t over the period and Shanghai stocks stabilized at 32,190t, neither increasing or decreasing. LME gross stocks have tumbled by -5.65% as have available stocks on the LME by -3.51%. However, as stocks have continued their decline so too have zinc prices, mystifying some, causing alarm in others.

The alarm can be somewhat attributed to a mythical rise in Chinese production, which to date has not appeared in the form of inflows into Singapore or Shanghai in significant quantity. Conversely, back orders have fallen some -24.16% to just 5100t, the even keel to sustain continued draw downs in inventory levels. It is doubtful that back orders will be able to absorb inflows and continue to draw down stocks unless there is a renewed pickup in new orders. Quite alarming is the U.S. back order number at a mere 625t, which has historically seen pipeline backorder numbers at around 10,000t, which indicates a much slower downturn in U.S demand.

One could conclude from the table above that China has held off from dumping stocks on the LME at historically low prices but with very low demand from the U.S. for the foreseeable future, the risk to the downside is heightened. Evidently a turnaround in placed orders could send zinc to new short-term highs.