As we went to press on Friday, aluminium was toying with 'key resistance' put by technicians c. 2830. Initial short-covering following on from Thursday's strong finish had carried the market to a peak of 2848, though by the time we signed off upward momentum appeared to be flagging as prices drifted back to 2775. Exchange stocks increases in London and Shanghai had put copper under pressure and without any momentum of its own, the light metal slumped along with the others. Liquidity was lacking as the market fell almost non-stop as far as 2680 in the pm kerb.
As longs bailed out of outright positions, so nearby spreads lengthened again after having contracted acutely the previous day. Dec20-27 eased to 2.00b (4.00b), Dec 27-Jan17 to 4.00c (1.00b) and Jan-3m to a linear 3.00b (9.00b). Forward tightness also fell away with 2007 coming by some $5.00/mth and 2008 by $3.00/mth.
As the chart clearly shows, Friday's move above and then close below the previous day's range signalled a 'key reversal' for chart-oriented traders and the likes of Cliff Green Consultancy had longs stopped out in the fall. The move had been arrested by the 30-day moving average (now at 2688) and while first thing Monday prices picked up somewhat in Asia to 2710, as London reopened values were under the cosh once more. The low had been 2665 at time of writing and as we signed off 3-months was changing hands at 2680 with volumes totalling a handsome 3,650 lots. A decisive breach below 2660 would signal moves towards 2600 and 'even' 2540, wrote CGC in a report, as they themselves now looked to put on shorts on any corrective bounce.
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