Copper Prices and Home Sales? Don't Worry

By Brad Zigler

COMEX copper prices took it on the chin on Tuesday's morning's floor session. The May contract sank 2.5% on the opening, carrying over the lower trend of the overnight market. Prices edged a penny lower by the time the highly anticipated NAR home sales report was released. The report, based upon an index created by the National Association of Realtors, indicated that contracts signed in February fell by a larger-than-expected 1.9% margin. Insiders had expected a decline of only 1.5%. Not so encouraging, that.

But there was a silver, er, copper, lining to the report. The pending home sales index for January, previously reported as flat from December 2007, was revised upward 0.3%. Net-net, that's really a 0.1% negative surprise.

The red metal's weakness comes as part of a roller-coaster move that took prices from a $3.983 top on March 5, to a trough two weeks later at $3.47 and back up to the floor session settlement at $3.9795.

You could say that copper's simply digesting some of last week's rally. Some technical indicators had been, in fact, flashing overbought signals but overall, there's a neutral-to-bullish tone to the market (pay attention, option traders). The 20-day moving average at $3.796 is key support if the crutch at $3.87 is knocked over. So far, the $3.87 level held firm on Tuesday.

On the other hand (there's always another hand, isn't there?), bargain hunters could find this sell-off as an opportunity to build a foundation for another assault on the $4 level.

A lot of copper's fortunes are tied to homebuilding demand, so signals from the real estate market are closely monitored. Okay, cuprophiles, here's your signal:

The National Association of Realtors figures that existing home sales will stabilize now before beginning to pick up.

According Lawrence Yun, the realtor group's chief economist, the jumbo mortgage market is a key indicator of the sector's health. Expected liquidity improvements for jumbos, he says, "will help prices recover in the second half of the year."

So, will there be a turkey on realtors' (and copper traders') Thanksgiving table this year? We'll see ...