Base Metals

Base metals rose on MCX and LME tracing the gains in gold, recovering oil and weak dollar. The complex has also been lifted on account of index re-weighting. Base metals followed on from overnight strength Tuesday on a mix of index-related fund buying and short-covering although traders said that that the rally is likely to be short lived.

· LME base metals may get a near-term boost from the annual index reweightings which have officially begun this session, but once rebalancing is completed next week week, traders expect economic concerns to return to the fore.

· The reweighting of the Dow Jones AIG Commodity Index, or DJAIGCI, takes place each year in January on a price-percentage basis between the fifth and ninth trading day of the year. This means it begins Tuesday and ends Jan. 14. This year, 2007 underperformers nickel, zinc and aluminum are expected to benefit the most from related buying.

· The National Association of Realtors' (NAR) pending home sales index fell sharply by 2.6 pct in November to 87.6, near its 2007 low but still above readings in August and September.

· The pending home sales index counts contracts signed for buying homes, indicating the existing home sales rate one to two months ahead when the sales actually close and are counted in that report. While the number dropped in November

· The Thai cabinet has asked the National Economic & Social Development Board to conduct studies into development of southern seaboard infrastructure to facilitate investment in upstream steel projects.

· Striking workers at Zambia"s Chinese-owned Chambishi Copper Smelter have returned to work after fruitful talks with management Monday. 'Workers are back at work to allow labor talks to continue' Mando said by telephone from Chingola, in Zambia"s copper belt. However, Mando said the two sides hadn"t agreed on any wage deal. Up to 500 construction workers at the smelter went on strike last week demanding a 40% wage increase and better working conditions.

MCX Copper Feb (Daily Chart)



Technical Outlook:

Momentum studies are still bullish but are now at overbought levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over up which is a bullish indication. The stochastics indicators are rising from oversold level, which is bullish and should support higher prices. The market's short-term trend is positive as the close remains above the 9-day moving average. The downside closing price reversal on the daily chart is somewhat negative.

Recommendations:

MCX Copper Feb: Buy at 283-284 for the target of 290 and 294 with stop loss at 276.50



MCX Zinc Jan (Daily Chart)



Technical Outlook:

Momentum studies are still bullish but are now at overbought levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over up which is a bullish indication. The stochastics indicators are rising from oversold level, which is bullish and should support higher prices. The market's short-term trend is positive as the close remains above the 9-day moving average. The downside closing price reversal on the daily chart is somewhat negative.

Recommendations:

MCX Zinc Jan: Buy at 101 for the target of 104 and 106 with stop loss at 99.50



MCX Nickel Jan (Daily Chart)



Technical Outlook:

Momentum studies are still bullish but are now at overbought levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over up which is a bullish indication. The stochastics indicators are rising from oversold level, which is bullish and should support higher prices. The market's short-term trend is positive as the close remains above the 9-day moving average. The downside closing price reversal on the daily chart is somewhat negative.

Recommendations:

MCX Nickel Jan: Buy at 1150-45 for the target of 1190 and 1215 with stop loss at 1135



MCX Lead Dec (Daily Chart)



Technical Outlook:

Momentum studies are still bullish but are now at overbought levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over up which is a bullish indication. The stochastics indicators are rising from oversold level, which is bullish and should support higher prices. The market's short-term trend is positive as the close remains above the 9-day moving average. The downside closing price reversal on the daily chart is somewhat negative.

Recommendations:

MCX Lead Jan: Buy at 103.5-104 for the target of 106.15 and 108.50 with stop loss at 102.20

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