MI Comment: Consumer bonanza as funds liquidate

Copper took the brunt of a brutal sell-off on Thursday; the writing had been on the wall before we went to press yesterday. LME 3-month turnover reached an enormous 42,000 lots across the complex (14,000 of them were aluminium), with a record 35,000 lots traded via electronically via Select, as funds pulled out en masse from the risky end of the investment spectrum. Aluminium's descent initially was orderly but decisive, falling from 2550 to 2505 before we signed off. With the yen rallying strongly as carry trades were unwound, consumers in Japan particularly were feasting on low prices not seen for many months, though prices continued to drop. The market bottomed out at 2455 in the late afternoon, whereabouts high volumes changed hands before recovering to 2490 during the aftermarket. Aluminium's forward curve has been something of a conundrum for some months and while one might ordinarily expect forward discounts to be slashed heavily in a falling market, only in 2011/2012 did rates ease notably. The contango throughout 2008 stretched somewhat, while H1 2009 was now rated Level. At 6,800 lots aluminium's turnover was still higher than copper's at time of writing on Friday morning, though most eyes remained trained on the red metal. The light one had bounced up to 2522 in early Asian trading, courtesy of the aforementioned consumers, though by the time the morning rings came around prices had tailed back to 2477 currently. Stocks movements on the LME and SHFE were routine, some industry news overnight would have been bullish ordinarily and the sky wasn't falling, though confidence had gone, leaving the metals complex at the mercy of the technicians. Our technicians of choice, Cliff Green Consultancy, in a daily report last night suggested that while aluminium's longer term trend still looked 'rather flat', underlying studies were deteriorating. Key support c. 2400 was expected to be challenged, with a fall below pointing to deeper falls around 2200…