THE PACIFIC COMMODITY LETTER
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360-289-9441(March 26, 2000) METALS: SILVER--May silver is just about as good a candidate for breakout theory as any that I have ever seen; this is because its trading channel has moved sideways between two parameters of resistance and support and is clearly defined. When you can identify such a market, an open order on a buy stop just above the resistance line and an open order on a sell stop just below the support line should "engage" a breakout, when and if it occurs. Then, a stop-loss order is placed just inside the former channel line, to limit the risk and the opposite order, not engaged is immediately canceled on the "fill." This is the theory and when it works ideally, the price bars do not return to the former channel; the market moves strongly in one direction or the other. We shall have to see if silver will obey this theory.
In the meantime, there is a bit of bullish bias, but within the channel, of course. Prices moved from 5.06 last Monday to 5.21 on Wednesday, the entire width of the channel. 9- and 18-day moving averages are in the buy mode and direction indicators are bearish while momentum is bullish. One can try to catch a cycle within the channel, but this is a most difficult market to gauge. There do not seem to be any strong fundamentals to effect it. "Building a base, it is called," said one silvertrader.
PALLADIUM--June palladium has fallen to a five-week low. Some of the weakness has been attributed to Russian political weakness.
COPPER--May high grade copper has been a bear market in this newsletter since the third week of January, despite the modest excursion up from the 78's two weeks ago. This past week saw a continuation of the uncertainty of copper, moving quickly from 70.50 Tuesday to 82.60 Wednesday, but then giving half of it back and closing at 81.10. Up one day and down the next; you really have to look at the longer-term charts to get a true picture of this market. Stochastics are bearish in the short term, but bullish in the intermediate and long term; RSI is not an issue. Momentum is bullish in the short term and so is the directional indicator, but negative for the intermediate and long term. The momentum indicator is bullish intermediate and negative long term. 9- and 18-day moving averages have just moved to a buy zone. Overall bearish but bullish in the short term.
COMEX copper faded Friday after London's session disappointed. It was a case of long liquidation and locals coming to the short side as May dropped 70 cents. On the bullish front, a strike by port workers at Valparaiso, Chile might spread to San Antonio and San Vicente may also strike, bring in copper workers from Iquique and Antofagasta as well. Veteran traders are quite accustomed to strikes by port workers and minimize the disruption. There was some decline in copper stocks due to shipments to China, but traders believe that this has already been factored into prices. There are two sentiments at work: 1) belief that export business is strong; and 2) belief that since the market didn't move very much last week, it will not move very much higher now. Orders for durable goods, the big ticket metal products ordered by corporations, fell sharply in February and this hurt the base metals. May closed at 81.10.
Martin B. Miller
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