Copper vulnerable as China holiday looms and CTA liquidations intensify – TDS
|Weak Chinese manufacturing PMIs kicked off the selling activity in Copper, but CTA selling activity into the liquidity vacuum has exacerbated the downside with algos on track to sell more than -7% of their max size, TDS' Senior Commodity Strategist Daniel Ghali notes.
Systematic sellers may accelerate Copper declines
"Given China has been the most acute source of buying activity lately, the liquidity vacuum resulting from upcoming holidays present a significant risk for prices as CTAs set to liquidate their Copper in most scenarios for prices over the next several sessions."
"Prices now need to rally only to avoid subsequent liquidations. Even a flat tape will force CTAs to abandon their remaining longs, which given the liquidity vacuum, can result in notable downside in prices. Further, a big downtape could lead to large-scale short acquisitions that could total a behemoth -45% of CTAs' max size in this scenario."
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