MI Comment: Aluminium wilts as stocks, lending weigh

The aluminium market had jerked into action on Thursday afternoon after a very dull morning session, though by Friday morning traders had dozed off again as we went to press. Technically, the market had failed to challenge nearby overhead resistance starting at 2500, making a high of 2481 in the premarket, while fundamentally the build in LME stocks was putting the dampeners on things. Over the course of the morning prices slipped back to lows of 2446 before a marginally better-than-expected US consumer confidence reading sparked a bounce. Prices briefly regained 2471, though nervousness in the UK stemming from the feared collapse of a high street bank and reported 'heavy lending' in aluminium's forwards weighed on prices. As dealers left for the day 3-month values languished at the lows, of 2428. The forward curve flattened considerably with contangos up to H1 2009 growing by up to $5.00/mth. Elsewhere backwardations eased by $1.00-$2.00/mth typically, though the notable exception was H2 2010, which tightened by up to $7.00/mth! On Monday morning LME stocks clocked up another 6,125t and in very light trading prices had come off further from an early high at 2437 to 2415 currently. With Japan closed for "Respect for the Elderly Day", volumes were light in the absence of consumers there and so far LME Select had registered only 1,215 lots of outright business. Having so far held technical support at 2400, Cliff Green Consultancy in their latest daily report did not discount further tests of resistance up at 2500/10. However, a decisive move below 2400 would "complete a much bigger top" and signal targets around 2200, they warned. Last at 2427.