Commodity Trading Advisors (CTAs) are being whipsawed in base metals, forced into buying back some of their recently sold Aluminium, TDS Senior Commodity Strategist Daniel Ghali suggests.

Commodity demand expectations continue to deteriorate

“Under the hood, commodity demand expectations continue to deteriorate at a fast clip, which places additional focus on the Third Plenum to turn the tide. Failure to do so could result in renewed downside across the complex, as physical demand trends continue to deteriorate with little offset provided by renewed concerns surrounding supply risks.”

“Our simulations of future prices also suggest more notable downside convexity in Aluminium, as a downtape could catalyze large-scale CTA selling activity with algos forced to abandon their entire long book.”