As we signed off on Friday it looked like the LME complex was shaping up for an exciting end to the week, the month and the first quarter of 2007. Aluminium had lifted from a low at 2776 to 2805 after SHFE stocks had fallen 7,600t and the buzz among dealers was of some long-side shenanigans in the options market. However, as it turned out the pm session was a bit of a damp squib, with the market peaking at 2815, well short of the key 2840 level that most market watchers were looking for. Outright 3-month prices instead slipped back with others on profit-taking, though more interest was visible in the nearby spreads market. Despite a surprisingly strong set of US economic indicators in the afternoon, values ended all the way back down at 2780, finishing the session unchanged.
While outright prices faded over the afternoon, a run on the nearby spreads was underway both in aluminium and copper. Rates within C-3m tightened throughout, though the biggest mover was May-Jun, which swung from 5.00 contango to 6.00 backwardation, remaining linear. Shorts just seemed to panic, one local observed, as they bid for large volumes in a lending vacuum. Forward rates tightened by $1.00-$2.00/mth mostly, on evaluation, though in H1 2011 they eased by $3.00/mth.
After Friday's early excitement about month-end window dressing and the prospect of fresh fund allocations for the start of the new quarter, Monday morning's feeling around the market resembled a hangover. At the start of trading in Asia aluminium registered a 3-lot trade up at 2789.50, though from there prices slid quickly to 2770 and then accelerated as the premarket progressed, to a low currently of 2739. Volumes stood at 2,000 lots as we went to press.
With the market having failed to challenge upside resistance c. 2840, technical eyes were now on support, expected by Cliff Green Consultancy to start in the 2720 zone. A market close below 2710 would regenerate downward momentum, the trading strategists added, looking for moves towards 2660 and 'even' 2600.
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