dj comex copper review

DJ Comex Copper Review: Up On Short Covering, Escondida News
DOW JONES NEWSWIRES

Short covering due to chart-based factors and worries about a strike against
the world's largest copper mine next month enabled high-grade copper futures to
bounce back from mid-session weakness to post a gain Monday, traders and
analysts said.

The most-active September copper contract rose 5.90 cents to settle at
$3.3820 per pound on the Comex division of the New York Mercantile Exchange.

At one point, it fell to $3.2100, its weakest level since June 29, before
snapping back. The recovery occurred after a union leader said he envisions a
strike against Chile's Escondida mine beginning on Aug. 7.

"That has a lot to do with it (copper's recovery)," said Jim Quinn, commodity
floor analyst with A.G. Edwards. Most of the buying appeared to be speculative
in nature, he added.

A trader commented that some chart-based selling occurred previously on ideas
that three-months copper in London might break down through $7,000 a metric
ton. It didn't, stopping right around here.

"There was a short-covering frenzy," said the trader. "It was like sharks in
a feeding frenzy.

"Once it bounced back through $7,100, copper looked OK. And then once it got
back above $7,200, all bets (on lower prices) were off. It accelerated quickly.
It was all technical, nervous short covering."

Quinn pointed out that industrial commodities in general staged a comeback.
As copper closed, September crude oil was up 42 cents to $74.85 a barrel after
earlier trading down to $73.50. And while platinum finished weaker, the October
futures did finish well above their weakest levels.

"Several other industrial commodities managed to pare some of their earlier
weakness, and copper is no different," he said. "But the Escondida (situation)
is really contributing to the copper."

For much of the morning, copper prices in London were stronger than those on
Comex, pointed out Quinn.

"Something had to give - either London had to back off or we had to rally.
And it looks like we're rallying a bit."

A couple of traders linked copper's midday weakness largely due to
liquidation on chart-based factors, since there had already been some worries
about a strike against Escondida. A trader commented that some "weak longs" had
been getting out of their positions, encouraged to do so by a recent slip in
prices that took the futures below trendline support late last week. Another
referred to the early setback as "stale liquidation," with some specs perhaps
pushing for sell stops to be hit.

The decline has been similar to the one that occurred back in June, when the
futures dipped below the $3 area after hitting record highs in May, one of the
traders added.

Larry Young, senior trader at Infinity Brokerage Services, commented that
while he looked for the market to recover, there nevertheless had been a risk
of an "M" formation on the charts, which would be bearish. The key support area
for September copper would be around $2.91, roughly the middle of the "M."

Above this, another trader put closer-by support at $3.1910, then $3.08.

Inventories of copper in London Metal Exchange warehouses rose 975 metric
tons Monday, leaving them at 97,300 metric tons. The most recent Comex stocks
data, released late Friday afternoon, were unchanged at 7,144 short tons.