The industrial metals complex remains in the crosshairs for Commodity Trading Advisors (CTAs), TDS senior commodity strategist Ryan McKay notes.

Base metals remain on demand

“With the upcoming plenum in China gaining plenty of market focus, base metals have held strong as stimulus optimism gets baked in. However, our gauge of global commodity demand continues to weaken, while depressed premiums and surging inventories in the Middle Kingdom argue against fundamental tightness in Copper.”

“With still bloated money manager positioning on Comex and LME, the lack of evidence supporting current physical tightness, or a disappointment on potential Chinese stimulus, can continue to see these positions unwind. Indeed, speculators on the Shanghai Futures Exchange (SHFE) hold only modest positions across the base metals complex.”

“In this sense, as upside momentum fails to manifest, CTAs have turned into sellers of the Red Metal. However, funds could halt their selling if prices move back above $9,760/t, while further downside toward $9,142/t would be needed to fuel additional liquidations.”