Base Metals - due for a shake out?

The base metals like Copper, Aluminium, Zinc and Lead seem to be holding up very well considering the uncertainties in the market. In contrast nickel is faring far worse, but it has likely bottomed. Paradoxically nickel miners are recording strong prices. There are I guess a number of reasons for this:

1. Strong demand from China

2. A market view that the Fed will support the market with a rate cut

3. Tight supplies for some metals

Having said that, the fundamentals dont look so good for some metals, and some charts might give reason for concern. The chart above shows that copper prices have retreated from a strong resistance level. My belief is that copper is headed down to $US2.50/lb, but it will then find support. Long term I think the outlook is positive, and we are likely to see an ascending triangle develop in coming years....a protracted period of high prices. I think things will be ok in the short term because it takes time for bad loans to be liquidated, and in the meantime there are strikes and the prospect of a Fed stimulus. But I really dont see higher copper prices in the medium term.

1.Copper prices have been held up by strikes in Chile and Mexico

2. We have yet to see any flow through of softer demand from China

3. There is a shortage of lead and aluminium because of a lack of discoveries. Stocks are thus short and prices bouyant.

But there has been alot of nickel capacity added so nickel prices have collapsed. But we might expect a turnaround there, so for the next 2-3weeks I expect stronger metal prices, but then massive selling.