Copper faces a bearish COT extreme as short term positioning turns bullish

Week 41 brings conflicting signals in copper near record price levels, while the Mexican peso shows a sizeable bullish positioning shift and natural gas retains long lookback extremes.

Copper is the market that deserves the closest attention in this week’s COTbase review. Commercials, the hedgers, show a bullish short-term COT change signal, yet the longer-term picture remains at a bearish COT extreme. Price is also at record highs within the chart shown, which extends back to 1990. That combination leaves more than one plausible outcome.

Copper’s bullish change does not resolve the bearish extreme

On the one-year chart, the change in Commercial net positioning is much larger than average and points in a bullish direction. This is a change signal: it describes the recent movement in positioning. It does not mean that the overall position has ceased to be historically bearish.

The distinction becomes clear when the chart is expanded to the longer history. Copper remains at a bearish COT extreme even after the bullish change. The iCOT score offers no additional directional support here; it is around zero, which I treat as neutral. There is no reason to turn that neutral reading into confirmation of either side.

I would therefore keep the short-term change and the longer-term extreme in view together. The recent shift provides a bullish signal over the shorter horizon, while the extreme keeps the bearish interpretation relevant. Choosing only one would miss the tension that makes copper interesting this week.

There is also a possible commercial capitulation scenario. If Commercial participants face margin calls and are forced to close short positions, covering those shorts requires buying. That buying could help fuel the rally rather than bring it to an end. I regard this as a possibility, not evidence that forced covering is already taking place.

The 2020 example is useful context. Copper reached what was then an all-time bearish COT extreme, but price continued to rise. It shows why an extreme alone cannot settle the direction of the next move. The current price context is different: copper is at record levels within the history shown. I would not assume that the earlier outcome will repeat.

The question is whether the bearish extreme eventually prevails or whether the rally continues, potentially with support from short covering. The latest bullish change does not answer that question, and the neutral iCOT score leaves it open. For now, the positioning calls for attention to how price and subsequent reports develop rather than a confident reversal forecast.

The Mexican peso’s bullish shift still needs stronger support

The Mexican peso offers a clearer bullish positioning direction. The latest Commercial change is the largest visible on the one-year chart, measuring 42% against the net-position range over the 52-week lookback used in the change analysis. That percentage is not a 42% increase in the size of the position.

There is a second layer of support on the five-year chart: relative to roughly the past three years, positioning is at a bullish COT extreme. The recent change and the relative extreme therefore point in the same direction, unlike the mixed picture in copper.

However, the iCOT reading is not particularly bullish at this stage. I would find readings in the 70–80 area more supportive. Price is also undergoing a dynamic shift, so I would allow the market some time rather than treat the positioning alignment as a fully confirmed turning point. The bullish case is worth watching, but the present evidence still calls for caution.

Natural gas retains bullish extremes across two trader groups

Natural gas remains notable for the depth of its positioning extremes. The classic futures-only COT data shows a 346-report extreme in Large Speculators and a 590-report extreme in Commercials. Both form part of the bullish interpretation in this week’s review.

These are separate report-count measures attached to different trader groups, rather than one combined signal. Their alignment supports the case for higher prices, but it does not establish when that move should occur. I would retain the bullish reading without turning the length of either lookback into a timetable for price.

The rand’s bullish case rests on the recent change

The South African rand also shows a larger-than-average bullish positioning change, the largest visible over the past year. Here, however, the supporting evidence is thinner: iCOT is neutral and the five-year positioning picture is broadly neutral too.

The rand is a smaller market, and I would put less emphasis on its COT analysis. Its short-term change is worth noting, but it does not have the longer-term positioning support seen in the peso. Across these markets, the useful distinction is how much confirmation accompanies each signal; copper remains the clearest example of why a strong reading can still leave the direction unresolved.

For my full Week 41 chart analysis, watch this week’s COT review

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