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April 12, 2005

Sell Copper

Copper is just about the only major industrial futures contract that is still trading on its highs....and Copper is REALLY high. Historically, when Copper ends a bull market, it has a tendency to go down in a big way, and it does so very quickly (examples below), and to me, appears to  be set up to do so once again....As I mentioned in my April 11th newsletter, I believe the whole "commodities are going through the roof" thing is way, way overdone and assumes that high prices can remain high prices indefinitely.....

I am selling (shorting) Copper, using both futures and options, with the expectation it will fall 40 to 50 cents during the next 3 to 6 months....I may be dead wrong, but similar to the Unleaded Gas we shorted last week, I think the initial stage of the move could be lightning fast and if this idea looks sensible to you, it should be moved on immediately....Most markets tend to go down a lot faster than they go up....

Here is the big picture....At these levels, sideways is not what it typically does...

4-12-05coppermonthly.gif (16701 bytes)

Here are some examples of how Copper has topped out during the past 30 years....

4-12-05july74copper.gif (9017 bytes)

4-12-05july80copper.gif (9394 bytes)

4-12-05march88copper.gif (9313 bytes)


4-12-05july89copper.gif (9297 bytes)

 4-12-05july96copper.gif (9518 bytes)

4-12-05dec97copper.gif (9734 bytes)

4-12-05dec01copper.gif (10072 bytes)

Here is the current July contract....I am selling futures and buying puts looking for, at least, 40 cents on the downside. If I am right, I see no reason to expect the sell off  to be any different than all of those shown above....

4-12-05july05copper.gif (15799 bytes)

Thanks....Give me a call if you are interested (and don't "wait to see what happens")...There is a lot of money being thrown at commodities today, and everything seems to be doing something.....

Bill Rhyne


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