We left off Tuesday with technical analysts looking for an aluminium break above 2710 and while one did come along later, the "clear and sustained" move that Cliff Green Consultancy had looked for it wasn’t. By the time we signed off the market had explored a 2682-2717 range and in healthy volume it was trading midway as we went to press. Prices appeared to find a floor at 2690 as the morning wore on and a concerted effort to run fresh buy-stops lifted values to a high of 2730 after US CTAs joined in. However, gravity was not on the LME complex’s side, with prices succumbing to (Far Eastern) producer selling and profit-taking on a poor set of US economic indicators. Industrial production across ‘the Pond’ fell 0.6% in September with metal-consuming sectors slowing, which raised fears that today’s housing starts could bring more evidence of falling consumption. The whole LME complex slumped in the afternoon, with tin leading the way as it fell off a cliff in illiquid conditions. Aluminium sagged to 2670 in a mini shakeout, after the earlier break-up had drawn fresh buying.
‘Fund rolls’ were said to be behind an easing of nearby spreads, as money managers took recent tightness as an opportunity to roll nearby longs to farther dates cheaply. As a result, the whole C-3m structure relaxed somewhat throughout with the overall carry returning to contango. Intraday, forward rates had been much better bid than Monday night’s evaluations as producers lined up to lock in higher (basis 3-months) prices, though with values ending back unchanged at the pm kerb, spreads were almost unmoved. 2007 was easier by up to $2.00/mth, while 2011 slipped by $0.50/mth with no change in between.
The failure to take out resistance stretching up to 2730 yesterday had technicians looking for fresh tests of support at lower levels on Wednesday morning. CGC suggested that such moves could see aluminium explore the 2540/60 area “in the coming sessions”. A breach below indicated falls of another $100 after that, or else a break above 2730 was now needed to improve the underlying tone, they wrote. With that, as at time of writing during the premarket the light metal had opened at 2675 and after a low of 2670 had strolled up to 2720 thus far. Electronic turnover amounted to a respectable 1800 lots, though the next real move was likely to follow those US house building figures at the end of the am kerb. Last at 2710.
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