Copper price extends rally after Chinese data, deficit surprise

In New York trade on Monday September copper jumped to a high of $3.151 a pound after data out of China shows manufacturing activity at a seven-month high.

It's the seventh straight day of gains for the red metal after coming dangerously close to breaching the $3.00 a pound level for the second time this year.

LME copper also showed some strength climbing to $6,900 a tonne after inventories at warehouses managed by the exchange fell to a six-year low.

The latest jump came after the preliminary or "flash" Chinese manufacturing purchasing managers' index (PMI) indicated that the world's second largest economy was stabilizing.

China's HSBC/Markit manufacturing PMI for June rose to 50.8, up from 49.4 in May and much better than expected. A reading above 50 indicates expansionary conditions for industry.

The output and new orders components picked up, even though export orders weakened, suggesting strength in domestic demand.

Better than expected PMI number from the US also boosted sentiment and while the eurozone's measure of manufacturing activity fell back, at 52.8 it is still indicative of growth.

The output and new orders components picked up suggesting strength in domestic demand

The copper price is highly correlated with economic growth thanks to the widespread use of the metal in the construction, transport and power industries.

The global refined copper market swung to a surprise shortage in March and a 205,000 tonnes deficit for the first three months of the year, compared with a 206,000 tonnes surplus in the same period in 2013, preliminary data from the International Copper Study Group showed on Monday.

Defying market expectations, the copper price has dug itself out of a near four-year low struck mid-March.

The metal remains 6.5% down in 2014 as the market adjusts to slower growth in China which consumes more than 40% of the world's copper demand of some 21 million tonnes.

Chinese copper imports tumbled 16% in May compared to the previous month, but year to date China is still importing refined copper at a record setting pace – up a whopping 34% over 2013 to 2.1 million tonnes.

The better than expected import numbers out of China may be a bit misleading however, because much of Chinese copper imports are tied up in finance deals as collateral for trade credit and is not being put to industrial use.

Global primary aluminum output up 200 mt/day in May: IAI

According to figures released by the International Aluminum Institute (IAI), the global primary aluminum output was up by 200 mt per day during the month of May this year.

As per data, the average primary aluminum output excluding China was 67,500 mt per day in May ’14. This is when compared with the revised average primary aluminum output of 67,300 mt per day during April. However, the average output during May ’14 fell significantly from the levels a year ago. The global primary aluminum output had averaged at 68,100 mt per day during May 2013.

The total production during the month of May amounted to 2.093 million mt, almost 3.6% higher when compared with the previous month. The primary aluminum production had totaled 2.020 million mt during the month of April this year. Production during May this year was down when compared with the figures of 2.111 million mt recorded during May last year.

The primary aluminum output during the first five months of the year totaled 10.108 million mt. The average production during the five-month period was 66,900 mt per day. The total output during the corresponding five-month period in 2013 was 10.312 million mt at an average daily rate of 68,300 mt.

Weekly Economic Data for the week 21-Jun-14 to 27-Jun-14

Avg. change of last 1 year:	Average Change in Actual data calculated for last 1 year.
Expected impact on price:	This indicator shows the effect of the anticipation of data on the prices of related country’s major indices. We have categorized it as below: Very Good Good Neutral Bad Very Bad
Actual:	Refers to the actual/latest figures after its release.

Data for the week 21-Jun-14 to 27-Jun-14

Date	Time (IST)	Country	Data	Exp.	Prior	Exp. chg today	Avg. chg of last 1 year	Exp. Impact on Price
23 to 27 -Jun-2014	--	United Kingdom	Nationwide House PX MoM	0.5%	0.7%	-0.20		Neutral
23-Jun-2014	07-15 AM	China	HSBC China Manufacturing PMI	49.7	49.4	0.30	0.97	Neutral
23-Jun-2014	11-30 AM	Japan	BOJ Governor Kuroda Speaks in Tokyo					Neutral
23-Jun-2014	02-00 PM	United Kingdom	Bank of England Credit Conditions Survey					Neutral
23-Jun-2014	07-30 PM	United States	Existing Home Sales	4.74M	4.65M	0.09M	0.16	Neutral
24-Jun-2014	01-30 PM	Germany	IFO - Business Climate	110.3	110.4	-0.10	0.00	Neutral
24-Jun-2014	7-30 PM	Germany	Merkel Meets Designated NATO Head Stoltenberg					Neutral
24-Jun-2014	07-30 PM	United States	Reuters/Michigan Consumer Sentiment Index	83.5	83	0.50	2.48	Neutral
24-Jun-2014	07-30 PM	United States	US-New Home Sales	0.44M	0.43M	0.01	0.01	Neutral
25-Jun-2014	12-30 PM	Germany	Merkel Gives Policy Speech to Lawmakers Before EU Summit					Neutral
25-Jun-2014	06-00 PM	United States	GDP Annualized QoQ	-1.8%	-1%	-0.80%	0.45	Neutral
25-Jun-2014	06-00 PM	United States	US-Durable Goods Orders	-0.2%	0.8%	-1.00%	6.72	Neutral
25-Jun-2014	08-00 PM	United States	EIA Crude Oil Stocks change	--	-5.75	5.79	3.45	Neutral
26-Jun-2014	08-00 PM	United States	EIA Natural Gas Storage change	--	113	-113.00	33.60	Neutral
27-Jun-2014	02-00 PM	United Kingdom	GDP QoQ	0.8%	0.8%	0.00%	0.28	Neutral
27-Jun-2014	02-30 PM	European Monetary Union	EC - Consumer Confidence	--	-7.4	7.40	1.04	Neutral
27-Jun-2014	07-25 PM	United States	Reuters/Michigan Consumer Sentiment Index	82	81.2	0.80	3.26	Neutral

Economic Calendar 

BofA Blasts Sell Bonds, Sell Gold, Buy Dollars

"After several weeks, Gold is setting up for a sell, US Treasuries are set to resume their bear trend, and the USD is set to resume its bull trend. Get ready..." is the ominous warning BofAML's Macneil Curry sets forth in his technical treatise this weekend. Despite the plethora reasons for rates to go lower for longer (and treacherous market conditions expected ahead) and the various fundamental and technical drivers of recent precious metals strength, Curry says it's time.

Via BofAML's Macneil Curry,

Over the course of the past several weeks, some of our core views and themes have fallen into short term corrective mode. Specifically, we are referring to our bearish US Treasury view and our bullish US $ view (most notably against €, CHF and many EMFX, as well as gold and silver). In the week ahead, we look for these trends to re-emerge and do so in a manner that should provide some excellent low risk, high reward trade setups. Beginning with US Treasuries, we likely look to sell 10yr notes into the 2.53%/2.49% zone for the Apr-04 highs at 2.82% and beyond. In FX, we will likely look to re-initiate €/$ shorts into the 1.3676/3735 zone for a resumption of its medium, potentially long term bear trend and in $/ZAR we will likely look to re-buy near the 50d (10.5357) for a resumption of its long term bull trend and new 2014 highs (now 11.3915). Finally, gold is fast approaching the 1334/72 topping zone from which we look for significant weakness to and through 2013 lows at 1180.

Chart of the week: US 10yr Treasury yields to resume higher

In our view, the bear trend is about to resume. Intra-day charts say the 2wk consolidation is in its final stages. We will likely look to sell one last push lower, ideally to 2.53%/2.49%, for a resumption of the larger bull trend to 2.82% & beyond. 

Get ready to sell EURUSD...

The choppy range of the past several weeks has been frustrating, but now evidence says the medium, if not long term bear trend is about to resume. We will likely look to go short on one last squeeze to 1.3676/1.3735 for a resumption of the larger downtrend to 1.3104 and below. NOTE: we may also look to buy $/CHF

...and buy USDZAR

The impulsive advance (seen clearly on intra-day charts) following the test and hold of the 50wk avg/3yr t/line (10.3867/10.3778) says that $/ZAR has resumed its l/term uptrend. We will look to re-enter longs into the 50d (10.5337) for new 2014 highs

Setting up for a sell in gold

In last week’s KrystalBull we wrote that “the medium term trend has turned higher” for gold but that “gold bulls should not get too enthusiastic. AT BEST, we think it can reach the 1334/1374 area (measured move and yearlong contracting range highs) before topping and substantial weakness”. The strength of last week’s move caught us off guard and says that the 1334/1374 topping zone could be reached much more quickly than anticipated. We will look to go short into this zone. As can be seen from the chart below, gold is close to resuming its almost 3yr downtrend after a year of consolidation, with targets seen for a test and break of the 2013 lows at 1180.

INFOGRAPHIC: History of US money

Starting from 1775 when colonialists created their own continental currency, a infographic shared by Ghergich.

by Ghergich.

What is option ?

Dead Cat Bounce Pattern

Dead Cat Bounce Pattern is an event-based pattern, usually occurring after a large decrease in price caused by a news event. After the event-driven price decline, the price will :bounce" a small amount, before resuming its down trend. The larger the decline due to the news event, the larger the Bounce.
Success Rate: 90%, a very reliable pattern.

Duration: 92% are over in 4 days. Th average Bounce has reversed in 2 days.
Volume: Volume during the Decline event can be expected to be massive depending on the severity of the news event. Heavy Volume will continue during the Bounce.

Risks: Quick action is the key to controlling risk with this pattern, since most of these patterns have finished bouncing to the upside after 2 days.

Trading the Pattern: Traders may choose to play a quick bullish bounce immediately after the news event, or they may choose to go short directly after the Bounce. 

The average Bounce gain is 19% of the decline from the news event.