Should demand expectations recover, palladium's short squeeze could be reignited. It could be set-up to notably benefit from a reversal in broad commodity demand sentiment, TDS Senior Commodity Strategist Daniel Ghali notes

A recovery in demand expectations may push Palladium higher

“Should commodity demand expectations continue to subside, a cluster of Commodity Trading Advisor (CTA) selling programs could be catalyzed, sparking selling activity that could total -55% of the algos' max size.”

“In contrast, should demand expectations recover, Palladium's short squeeze could be reignited. CTAs are effectively 'max short' and therefore unlikely to add to their size in Palladium, even in a big downtape, whereas a commensurate rally could force large-scale buying activity from trend-following algos.”

“Considering that discretionary traders also likely still hold a substantial net short position, Palladium could be set-up to notably benefit from a reversal in broad commodity demand sentiment. A tactical relative value play appears to be an efficient expression.”