The Red Metal may now be nearing local lows. CTAs may still have some dry-powder to sell, but are unlikely to do so unless prices break below the $8440/t range, TDS senior commodity strategist Daniel Ghali notes.

A local low may be forming in Copper markets

“The combination of a full-blown capitulation from macro funds and the effective end to algorithmic selling activity suggest that the Red Metal may now be nearing local lows. After all, CTAs may still have some dry-powder to sell, but are unlikely to do so unless prices break below the $8440/t range.”

“While Copper would not be insulated from subsequent pain in global markets tied to a deleveraging event, vulnerabilities are mitigated as it is no longer a crowded trade. Further, our simulations of future price action reveal that CTAs may even return to the bid over the coming week, even in a range-bound trading environment.”

“A local low may now be forming in Copper markets. Still, upside asymmetries in systematic trend follower positions are most extreme in Aluminium, where we would expect large-scale buying activity to hit the tapes in the event that base metals stage a recovery.”