In mid-April, I highlighted Copper as chart of the week due to positioning where Commercials and Large Speculators were extremely crowded but Small Speculators were not there yet, so it became a chart of interest but not a actual CMR COT set up. Since that post, Copper went on to make newer highs and continues to trade near those highs as of today which is a clear example on the importance of trading your process and maintaining discipline. The set up was not there and there was also no clear news failure to trigger the trade but there was a reversal that could have been traded, but it was not set up.
An updated positioning chart that we published on Friday shows all three traders are crowded at extreme levels where it is now a CMR market that is set up as a potential short trade. That does not mean it is going down tomorrow, but it means there is now a skewed reward to risk trade potential. The key now is waiting for Copper to fail on bullish news, or what I refer to as a news failure event. The potential news could be related to Copper inventory levels or economic growth data with Copper being a good leading indicator of the economic cycle. Another factor to consider is Artificial Intelligence (AI) news since Copper is has become a popular proxy trade to AI (see Wall Street Journal screenshot below).
The first chart below shows price, COT positioning and CMR’s COT index showing that positioning is extreme. This view provides that advantage of visually confirming how price behaves at extreme
A closer look at positioning shows the extremes compared to the last two years, and it also adds Open Interest where we see closing of open positions this past week.
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Thanks,
Jason Shapiro & The CMR Team
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Wouldnt the China PMI and big red candle on April 30 be the news failure?