Aluminum continues to rise amid CTA – TDS buying activity

Disadvantageous asymmetry is forming, but it will take a big discount to trigger large-scale selling activity, notes Daniel Ghali, senior commodities strategist at TD Securities.

Large-scale CTA buying activity continues

“We reiterated that the setup in the aluminum markets was superior to that of the complex, with extreme asymmetries in algorithmic positioning still contributing to large-scale CTA buying activity. We expect trend-followers to now cover their remaining odds and build a net long position, resulting in a buy program that totals +11% of their peak size this session.”

“That said, this is likely to mark the peak in algorithmic buying for now, with our future price simulations now suggesting that the upside asymmetries in positioning risks that underpinned the rally have likely dissipated completely.”

“Negative asymmetry is forming now, but it will take a big dip to trigger large-scale selling activity. In this scenario, zinc appears most vulnerable to widespread selling activity.”