CMR Chart of the Week 4/15/2024

COPPER

During our Member Q&A Call yesterday a question was asked about Copper and how it’s related to AI as I mentioned the COT chart shown below in the weekly report. My response was related to what I hear other people saying all day where they've come to the conclusion that AI is going to take so much energy and so much of the grid that we have to build a new grid and increase energy capacity. To build energy capacity, you need a shitload of Copper, apparently, and that is the sentiment out there. Also, I could not have asked for better timing from CNBC where they published an article yesterday right after the Zoom call with a bullish Copper headline.

As you can see from the CMR COT chart, trader positioning as of last week has become extreme where Large Speculators (blue column) made a significant move increasing net-long exposure, which in turn forces Commercial traders (red column) to sell them contracts and increased net-short exposure to extreme levels.

Small Speculators did not buy Copper last week which is why this is not a standard “CMR Trade Set Up” but a very close set up, with Large Speculators (100 on the CMR index) and Commercials (0 on the CMR index) at max crowded levels.

Another important point that was brought up on the call was predicting where the market will go. Based on the COT chart and the ongoing reversal candle from the Sunday open, do I think Copper is going lower? maybe, but that is not what I do. I may offer a macro opinion on where markets may go, but when it comes to trading, I do not predict or forecast, I manage risk. What I try to do is identify markets that provide high reward/low risk trades, where over time, winners will generate enough alpha to make up for losing trades with an identified risk. For example, if I shorted Copper at the end of the day Monday based on a reversal candle on bullish news (LME refusing Russian Metals), I would risk my standard percentage per trade, where a close above Monday’s high, would stop me out. In other words, I identified my risk and my stop level. If Copper does turn, then I would exit when index data (the oscillator shown above in the third bottom pane) nears a level of 50 for any trader type, which indicates positioning is neutral, and I no longer have an edge in this market. A winning trade will average a 4 to 1 ratio to losing trades keeping my returns positive on the year.

Thanks,

Jason Shapiro & The CMR Team

To learn more about the Crowded Market Report, the services we provide and how we identify crowded markets, you can visit the links below. For a limited time we are offering 10% off any membership by simply using code substack10 during checkout.

---

Legal Disclaimer: CMR Publishing LLC is a content provider and publisher and is not a registered broker-dealer. By accessing Crowded Market Report websites and/or using Crowded Market Report products and services, including without limitation any and all content available on or through the Service and via SubStack, you understand and agree that the material provided in CMR Publishing LLC dba Crowded Market Report products and services is for informational and educational purposes only, and that no mention of a particular security in any Crowded Market Report product or service constitutes a recommendation to buy, sell, or hold that or any other security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.