IRA EPSTEIN & COMPANY
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312-207-1800(March 14, 2000) METALS: COPPER--As of the writing of this report, May copper is trading down 0.25 at 78.90.
Last week's trade was weaker again, as the market continued its attempt to find a new trading range. As I expected, copper prices were lower for the 3rd week in a row. I continue to believe that the market has but a short term left on the downside. My expectation is for the market to move higher in the long term.
Recent huge increases in the London Metal Exchange warehouse stocks have put a damper on major players looking to get long. Traders seem content to wait until the underlying fundamental supply picture changes. Until this market has established an area that can be considered solid support, I would expect the market to gradually trade lower. Crucial support at the 82.50-level has been breached. The daily chart action still looks poor. However, there is some hope when looking at the weekly chart. Current long positions should be covered if you haven't already done so. If May copper can strengthen and close above 82.50, the market may then attempt to move slowly higher.
Looking at the weekly chart, I still believe that this market may have as much as 20-40 cents of long-term upside potential. However, the market will probably move lower before it attempts to rally.
Last week the May copper contract lost 1.15 points or roughly 1.4% of its value. As the market continues to search for an area of support, I would expect that copper should gradually trade lower. New resistance levels must be broken in order to see any sort of a longer-term rally. There has been nothing newsworthy to impact market prices to the upside. The only current bearish information is still the large supply of metal on hand in the warehouses.
In terms of actual supply, London Metal Exchange copper warehouse stocks were at 832,675. Warehouse numbers were unchanged this week after they soared last week to another all-time high. This market is again focused on the higher than usual warehouse numbers.
Technically speaking, the 77.50 area basis the May contract should offer solid support. Major resistance is near the 82.50 level.
RECOMMENDATION--I recommend being short May copper at these levels.
Matthew White
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