Wednesday was an odd day on the LME, with markets looking perky in the premarket as aluminium led the complex higher on some strong buying interest at one-month highs. However, just as the light metal looked set to break above resistance c. 2930 buyers ran out of ammo and prices flopped in the afternoon. As we signed off 3-month values had topped 2927 with volumes close to 5,000 lots, though as the session wore on they pulled back as hopeful longs liquidated and the fear/expectation of another options-driven rally receded. Even reports of strike action at Nalco were insufficient to stem the slide all the way to 2872 in the afternoon, with a rising dollar bringing additional pressure.
Having lengthened considerably the previous day nearby contangos contracted only marginally, while forward backwardations generally eased by $0.50-$1.00/mth to the end of 2010. Two parties remained in the 30-40% bracket of the LME's WC warrant banding report.
Most of Thursday morning's action so far had been confined to nearby spread trading, while 3-month volumes languished at less than 1,000 lots currently. The trading range had been 2882-2860, with prices quoted halfway as we signed off. After yesterday's failure at resistance at 2930, Cliff Green Consultancy suggested that ‘nearby' support c. 2790 could come under fresh examination. For now, the market remained trapped in its broad sideways pattern, they concluded.
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