Chinese buying drove copper prices to a 16-month high. Three-month copper traded at $7,618 per metric ton, up $133.

Here's an interesting dynamic. Copper prices in Shanghai were higher than those on the LME. This allows traders to import copper at a profit. This helps to explain why there was such strong buying on the LME.

Copper was able to ignore the settlement of a strike at a Chilean copper mine.

Let's look at the explosive jump in the price of copper, and then examine the underlying factors that could signal the beginning of a sell off:

• From December 24, 2008 to April 3, 2009, copper rallied 51%.
• Global stockpiles tripled to about 567,000 tons since July.
• Hedge funds and other large speculators increased their net short positions in New York copper futures by .6% in the week ended March 31.
• Prices have been rising because of China's buying for stockpiles.
• Beijing's State Reserve Bureau (SRB) took advantage of the declines in 2008 and agreed to buy 300,000 to 400,000 tons. China may increase its stockpile to 936,000 tons in 2009.
• Jose Pablo Arellana, CEO of Santiago, Chile-based Codeleo, the world's biggest copper miner, said the December lows are "in the past" and Chinese demand rebounds.
• The 82-member Bloomberg world mining index led by BHP Billiton Ltd (NYSE: BHP) plunged 56% in the twelve months through April 3.
• Peter Sorrento, who manages Huntington Asset Advisor, said: "we think we could see a pretty significant sell off in the next quarter."
• A Bloomberg survey of 13 analysts estimates that copper will average $3,000.00 a ton this quarter, 21% below the April 3 closing price of $4,301.00 per ton.
• Copper and home building tend to go together. With confidence among U.S. home builders near record lows in March, there isn't much to spur the copper market much further to the upside.