IRA EPSTEIN & COMPANY
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312-207-1800(March 28, 2000) METALS: COPPER--As of the writing of this report, May copper is trading down 1.10 at 80.00.
May copper futures tested recently established support at 79.50 this morning and has since rallied off the lows. In my opinion, if the support can hold this week, the market can rally back to 82.50. If the market cannot hold support, it may fall to the mid-70's. Technically speaking, the market looks much better than I would expect considering the fundamentals. Warehouse stocks are still at all-time highs. Last week's trade was weak for the fourth time in five weeks. After the market unexpectedly moved higher two weeks ago, copper prices have backed off again. My opinion of the market is that we are stuck in a range.
Recent huge increases in the London Metal Exchange warehouse stocks continue to impact market prices substantially. Until metal stops flowing into the warehouses at such a rapid rate, this market will struggle to move higher. Only if the technical picture looks extremely positive, will prices rise. Traders still seem content to wait until the underlying fundamental supply picture changes. However, If May copper can strengthen and close above 82.50, the market may then attempt to move slowly higher.
Last week the May copper contract lost 0.35 points or roughly 0.5% of its value. As the market attempts to hold its newfound support area, I would expect that copper should gradually trade lower. It is possible that the market will trade sideways in a range between 82.50 and 78.50. 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 774,925. Warehouse numbers were sharply lower this week. Lower warehouse stocks may be a catalyst for pushing the market higher in both the short and long term. However, this market is still focused on high warehouse numbers.
Technically speaking, the 78.50 area basis the May contract should offer solid support. Major resistance is near the 82.50 level.
RECOMMENDATION--I recommend buying copper below 80.00 and selling it above 82.50.
Matthew White
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