GENERAL MARKET CONDITIONS

China has warned of threats in its dams due to cracks in some the dams caused by earth quakes. As a result it has closed some of the hydro power plants. Chinese aluminum and zinc companies shut plants in the Sichuan province. If less power is available to factories in China then production will be less in all base metals and greater Chinese imports. Greater Chinese imports of base metals will result in lower LME stocks and a short term rise in them. Unless investment interest rises in base metals (which at the moment is not), spikes will be short lived. Copper is still a better bet for the low risk trader. Zinc and Aluminum should find short term investors on major dips.

Manufacturing in New York shrank after a decline in April industrial production while the reverse happened in the Eurozone and Japan as first quarter growth beat market expectations. The US dollar has so far ignored the weak US manufacturing sector. Markets will take note of the difference in manufacturing growth sooner than later and there could be short term weakness in the US dollar. But the cable will find sellers on any rise unless there is stability in UK housing sector. Next week is a very crucial week for the US dollar and if it fails to gain against the majors there will be temporary weakness in it.

Crude oil has managed to hold $120 and made a smart recovery thereafter. It’s just a consolidation phase for crude oil before the next move. Last time crude oil had a correction of $10 (from $120 to $110), this time the correction is even lower (from $126.98 to $120.75). Crude oil should break out from this range after the options expiry.

NYMEX CRUDE OIL -- FUTURE -- INTRA DAY PIVOT: $119.80

Crude oil has to fall below $120 or break $127.60 for direction.

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