Aluminium performed a volte-face on Friday, sharply reversing the market's weakness from Wednesday and Thursday after technical support held and the options crowd again rattled the shorts. As we signed off prices had bottomed at 2810 after copper had come under pressure from a leap in SHFE stocks and tales of softening Chinese demand. However, technical support pegged c. 2790 was never challenged and as the day unfolded nearby spreads were bid aggressively. Jun-Jul was bid at 2.00 backwardation at one stage, locals said (later valued at 2.00c), giving traders a reminder of June's options play and as equity markets rallied in the afternoon shorts ran for cover. The light metal peaked at 2888 before easing back to 2870 in late trading.
Nearby spreads tightened throughout with June's options exposure still of primary concern, with interim spreads almost entirely linear. Forward movement was routine with most of the structure regaining $0.50-$1.00/mth after slipping in previous days. The LME's WC warrant banding report this morning showed one party in the 30-40% bracket and another with 40-50%, as at cob Thursday.
Trading was dull so far on Monday morning, though more action was anticipated on the rings, with May's 3rd Wednesday at Cash. The LME warehouse stocks report had been routine, the dollar was weaker against the euro, firmer against the yen. Turnover was less than 900 lots at time of writing and prices had fallen back from an early 2876 to 2840, with copper's Chinese supply/demand story again weighing the rest of the complex down. As the chart above shows, the range of the past month and a half put resistance c. 2930, while support was visible c. 2790, with technicians waiting for a breakout in either direction before re-entering. Last at 2845.
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