Copper Trump Rally Globe Mail13 Nov 2016 22:05
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Why copper just had its biggest weekly rally in 35 years
It will probably go down in the history books as the Trump Rally.
Copper has just seen its biggest weekly rally in 35 years. It's a stand out, even amid the turbulence that has rocked the broader financial universe. Trading volumes went supernova.
The entire global copper market, it seems, has been repositioned from bear to bull territory in a matter of days.
And while there is no doubt the election of Donald Trump as U.S. President has acted as an accelerator, there is more to this explosive price action than as yet vaguely-defined promises of infrastructure spending and reflation.
Copper's extraordinary 20-per-cent price surge has been as much machine-made as man-made.
This rally began last month. On Oct. 25 to be precise.
LME three-month copper opened that day at $4,649 (U.S.) per tonne and closed at $4,735. It then went on to record an impressive string of higher closes.
Two weeks ago only Mr. Trump and his supporters really believed he would beat Hillary Clinton in the race to the White House. The markets certainly weren't pricing in a Trump victory.
And with LME inventory falling fast and Shanghai Futures Exchange (ShFE) stocks low as well, there was little tangible sign of that much feared "wall of copper".
Fund money started flowing into the copper market in ever increasing quantities.
The LME's Commitment of Traders Report showed that the net money manager long position, as of Nov. 4, had already hit its highest level since the exchange started publishing its weekly report in 2014.
The weekly close on Nov. 4 was $4,991, the highest since April.
That close was right at one of those big-number levels, $5,000 per tonne, so beloved of chart technicians.
Another key big-number level was at $5,100 and an even hotter chart point was up at $5,400.
It's noticeable that copper's rally accelerated on each break of these technical levels.
Without going into the esoteric world of chart analytics, there are two takeaways from such technicals.
Firstly, copper had been defined for almost a year by range trading with every part of the market, from producers to consumers to speculators, positioned around that range.
Breaches of those trading bands caused a mass repositioning with short positions closed out, long positions put on and new short positions put on only to be closed out again as the price kept motoring upwards.
Meanwhile, options sellers covering their exposure would have added fuel to an already red-hot market.
The last part of copper's price rally has been driven by Chinese players waking up to what has been happening in the rest of the world.
The Chinese retail crowd has been playing other markets in r
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