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"Copper's Long-Term Bear Trend Is Resuming" BofAML Warns

Tyler Durden's picture




 

"Copper is breaking down," warns MacNeil Curry as BofA's technical strategist ignores the hyped hopes of newsletter-peddlers who see Dr. Copper's recent rise as indicative of a Chinese renaissance.

 

As Mike Tyson so philosophically noted, "everyone has a plan until they get punched in the mouth," and that 1-2 punch just hit Copper square in the jaw as macro data disappoints and the reality of a vicious circle of unwinding a rehypothecated commodity financing ponzi comes to bear. How much of copper's rise was artificially-created by CCFDs is unknown but as Curry notes, "the downtrend is resuming" and we will soon find out.

 

Get ready to sell Copper

 

Copper is breaking down. The completed 3wk Head-and-Shoulders Top and break of 2.5m trendline support (now 6801) says that the larger downtrend is resuming. A closing break of trendline support confirms, targeting 6321 (Mar-19 low and below).

 

Source: BofAML

 

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Wed, 06/04/2014 - 18:44 | 4824894 Yen Cross
Yen Cross's picture

 I'm ready to buy some silver! Bitchez

Wed, 06/04/2014 - 18:57 | 4824907 Pinto Currency
Pinto Currency's picture

 

 

Critical to sell copper right NOW as almost no inventory at the LME

http://www.kitcometals.com/charts/copper_historical_large.html#lmestocks_5years

 

And while you're at it, sell platinum and palladium as well as there's been a strike in S.Africa for 4+months and Russia's looking great.

 

Sell dammit!

 

Brian Moyni'hen'

 

 

 

 

Wed, 06/04/2014 - 19:08 | 4824969 Yen Cross
Yen Cross's picture

  Quietly sarchastic please?

Wed, 06/04/2014 - 19:12 | 4824982 Pinto Currency
Pinto Currency's picture

 

Will turn down the volume.

 

 

Wed, 06/04/2014 - 19:14 | 4824986 FieldingMellish
FieldingMellish's picture

No worries. They can pick up some copper from Chinese warehouses. Just join that huge line up to your left.

Wed, 06/04/2014 - 19:17 | 4824997 stocktivity
stocktivity's picture

Just build up cash....I smell deflation. Silver will get cheaper first. Then explode.

Wed, 06/04/2014 - 19:38 | 4825047 Silver Bug
Silver Bug's picture

There is an orchestrated attack on all commodities. The manipulation is unprecedented. Gold and silver are the only true safe have. This pull back is a blessing if you can dollar cost average.

Keep Stacking!

Wed, 06/04/2014 - 21:14 | 4825315 Lionhearted
Lionhearted's picture

When my dollar is worth more, I buy more PM's. It's a bargain. Have you bought a Big Mac lately or a tank of gas?

Wed, 06/04/2014 - 18:46 | 4824897 Pinto Currency
Pinto Currency's picture

-

Wed, 06/04/2014 - 19:19 | 4825001 CrashisOptimistic
CrashisOptimistic's picture

If copper says economic activity is in freefall, then so will be bond yields.

And the fact that oil is not says ominous things.

Wed, 06/04/2014 - 18:46 | 4824909 knukles
knukles's picture

OK
If Dr Copper breaks, it means the global economy is going to hell or there's lots and lots of rehypothicated copper been over sold into the ... oh well...

BTW, for those not having viewed the panoply of global government bond yields recently, look at the spreads of the rest of world v us treasuries.
Most everything else is selling through (lower yields) than UST's.
And no, it ain't credit or a lack of supply.

Take note, the Liquidity Trap is a bitch, Bitchez

Wed, 06/04/2014 - 18:58 | 4824945 Yen Cross
Yen Cross's picture

  Knuks, that was an great hypothesis.  Copper is stacked all over planet Earth. This inert/precious play on shipments (platinum/pladium ect) where/housing is fodder, is strategic.

Wed, 06/04/2014 - 20:06 | 4825136 disabledvet
disabledvet's picture

Two thumbs up for compliments in the cheap seats.

And I agree as well. Also need a shout out to "insider trading BofA" as they made an all too perfect call on treasuries Monday and Tuesday.

No more free cover sheets at Staples if you're sending a fax. 12 dollar pancakes at IHOP. The DMV and insurance companies have slammed the loophole over turning in your license plates shut too.

With the huge explosion at the gasoline refinery in the Netherlands makes me wonder if gasoline prices won't be hitting 5 bucks a gallon pretty soon.

I mean "down to the last slice of paper"?
Fer real?

Reminds me of the final days of Worldcom where Bernie was checking the number of cups at the water cooler.

That was a sixty plus billion dollar market cap company "gone within a week."

Clearly we're gonna have a horrific earnings correction here...that will moonshot the deficit (again) ...and who knows what shakes out from this one this time.

Wed, 06/04/2014 - 18:49 | 4824921 MeelionDollerBogus
Wed, 06/04/2014 - 18:57 | 4824944 SmittyinLA
SmittyinLA's picture

A new respect for Tyson, not just a boxer but also a poet 

"everyone has a plan until they get punched in the mouth,"


Wed, 06/04/2014 - 19:02 | 4824955 Carpenter1
Carpenter1's picture

Will something finally break dammit!

Wed, 06/04/2014 - 19:11 | 4824977 pauhana
pauhana's picture

Okay, there is no copper in the warehouses of China so therefore, in the scramble to try to prevent the Ponzi from being discovered, the price paid for the copper needed to supply the shortfall will be less?  We are truly screwed!

Wed, 06/04/2014 - 19:12 | 4824983 TinF0ilHat
TinF0ilHat's picture

Sell Sell Sell, so the people who tell you to sell can buy it all. 

Wed, 06/04/2014 - 19:20 | 4825004 HUGE_Gamma
HUGE_Gamma's picture

BAML was right about the move in yields this week.. i went short ZN sunday night and made some good money (appeared overbought in my own opinion)..

Wed, 06/04/2014 - 19:43 | 4825062 Quinvarius
Quinvarius's picture

Nope.  All the horseshit in the world is not going to make these idiots right.  The whole banking system made a bet against China and massive money printing in every possible way and lost.  Copper is going to double.  The Shanghai Composite is about to explode.  All the horsehit in the world about copper financing deals is not going to conjour up a full warehouse or make these bankers suddenly right about anything.

Wed, 06/04/2014 - 19:43 | 4825063 eddiebe
eddiebe's picture

Can anyone here give me a good reason why I should believe a banker? I think MacNeil needs a punch in the mouth.

Wed, 06/04/2014 - 19:45 | 4825071 Thirtyseven
Thirtyseven's picture

Lower copper prices: Good for electricians and plumbers.

Wed, 06/04/2014 - 19:56 | 4825076 Frilton Miedman
Frilton Miedman's picture

When BofA speaks and it coincides with my own logic, I reconsider my logic.

Just last night I had a discussion on another ZH thread on how copper demand in housing and electronics is proportionally less than traditional.

Homes no longer use copper piping, cathode tubes with several pounds of copper are past history with the advent of flat screens....which also negates larger copper wired transformers required to power them.

Copper's always going to have demand, just not in proportion to the past.

I sold copper 3 years ago @ just over $4 and it has underperformed badly since....I've been lmfao at analysts confusion over why housing can improve without "Dr copper".

You mean to say Iphones don't use as much copper as a PC cathode monitor???..Who'd a thunk!!

That said, Maybe BofA is my queue to reverse that stance, the TBTF "muppet indicator" has sounded the alarm.

Methinks BofA has directionally vested interests in copper, all to learn China is a wee bit lacking in "accounting skills".

 

 

 

Wed, 06/04/2014 - 20:14 | 4825164 disabledvet
disabledvet's picture

Yep...but..."housing" and "skyscraper" are a tad bit different.

If you're gonna build a thousand....thousand foot tall buildings....you're gonna use a lot of copper.

"Hence the stockpiling."

Of course the same holds true for commodities in general. Long China means "long everything."

With no recovery in sight for the USA...if China tanks you'll see a price correction all right.

More than likely in he form of an airstrike would be my guess though.

Wed, 06/04/2014 - 22:38 | 4825567 Frilton Miedman
Frilton Miedman's picture

 

 

True 'bout 'scrapers (and commercial), but I don't suspect there'll be a larger proportion of 'scraper construction vs housing relative to past, it's arguable how much impact lower electronic & residential demand will have on the whole, but no denying it will have an effect.

The best bull argument is on supply.

 

Wed, 06/04/2014 - 19:58 | 4825110 LooseLee
LooseLee's picture

So, if copper (and silver) is a leading economic indicator (which they are), what's the deal with the stawk market?

Wed, 06/04/2014 - 20:02 | 4825122 I Write Code
I Write Code's picture

I don't need no copper
For my prescription to be filled
(I don't need no copper)
(I don't need no copper)

I don't need no copper, I tell ya now
For my prescription to be filled
(I don't need no copper)
(I don't need no copper)
Only my QE bonds,
Could ever take away this chill

Wed, 06/04/2014 - 20:20 | 4825175 RMolineaux
RMolineaux's picture

It would appear that the world thirsts for a stable medium of exchange that would obviate the inconveniences of barter and the keeping of accounts in sacks of wheat, ingots of metals or days of work.  Whether it is wampum, gold, silver or copper, mankind has always sought a means of measuring and substituting these commodities for purposes of exchange.  Equally ubiquitous has been the effort to trick the gullible out of the fruits of his work by fraud and manipulation if these means of exchange.  These tendencies would exist whether the chosen means of exchange were metals, banknotes or promises by governments or central banks.  Notwithstanding these threats and confusions, most participants in economic activity demand a STABLE means of exchange to protect the product of their own work and the value of property they may have acquired.  In feudal society the king and the lords of the manor simply accumulated the current coinage and spent or lent it as they saw fit.  Their power to do so was based on a strong sword arm and the doctrine of the divine right of kings.  Commercial banks arose during the renaissance period while the Christian and Islamic prohibitions against usury were soft pedalled.  Jumping to recent history, the role of the commercial banks and their central bank creatures has expanded enormously.  While not creating any new value through work or technology, they have facilitated the use of the current means of exchange by offering custodial convenience (deposits) and loans of some of these deposits while the owners did not need them.  This process was inherently unstable in situations where too many depositors required their money at the same time.   This gave rise to the concept of fractional reserves with the central bank -  a concept often denigrated on this board.  The commercial banks were required to keep a certain percentage of their deposits with the central bank, in addition to whatever cash they had on hand.   The way it works is that the banker is required to maintain, say, 10 percent of his deposits on deposit at the central bank.  If he receives a deposit of 100 from a merchant, he has to send 10 of it to the central bank and can keep the rest for loans or working cash.  If he loans out all of the 90 remaining, the loan recipients then take the money to another bank and the process is repeated indefinnitely until the amounts involved become too small to bother with.  Thus the supply of money can expand, but within known limits.  Many central banks to this day control the money supply by making small adjustments to the percentage of required reserves. 

Since they rarely mention alternatives, it is difficult to determine whether the critics of fractional reserve banking prefer 100 percent reserves or no reserves.  If the former, then the individual commercial banker must send all new deposits to the central bank and retain nothing for his own use.  If the latter, then the banker has unlimited discretion to loan out all of the deposits he receives and the money supply can be expanded without limit.  By making these points, I hope to persuade readers that the fractional reserve concept, by itself, is not the source of our current monetary instability.    

Wed, 06/04/2014 - 20:30 | 4825212 Winston Churchill
Winston Churchill's picture

Fractional reserve banking hasn't worked that way in a long time,

if it ever did.The commercial banks have been creating the 10% along with the 90%.

Apart from this devasting flaw destroying  your argument, do you have any other ideas

we can debunk here for you.

Thu, 06/05/2014 - 13:16 | 4827280 RMolineaux
RMolineaux's picture

Hey Winney -  You forgot to mention that when a bank creates a loan and deposit at the same time, it can only do so if it has free reserves at the central bank, i.e. funds in excess of the minimums required.  Of late, the Fed has been creating new excess reserves by monetizing the debt.  That has nothing to do with the mechanics of fractional reserve banking.  Banks have always considered the requirement to maintain reserves as onereous (even though they were set up for their own protection).  The banks have justly critisized the tactics of money market funds that function like banks but have no reserve requirements.  But the money market funds nevertheless have to rely on an inflow of funds made available under the fractional reserve system.  Yes, it still works that way, even though it is rarely talked about and a lot of people never learn about it. 

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