Some pressure on discretionary short – TDS

The short compression game in the palladium markets is still on, but we are now seeing a time decrease on the horizon, notes Daniel Ghali, TDS Senior Commodity Strategist.

The short compression play in the Palladium markets is still active

“Commodity Trading Advisor (CTA) buying activity in recent sessions has raised the risk that the long-awaited algos could materialize again. Our simulations of future prices suggest the possibility of a large-scale short squeeze that would all but wipe out the algo shorts.”

“However, discretionary traders are now more short than algos in the Palladium markets. Our indicator suggests that this cohort has almost re-accumulated their record net short position, which adds vulnerabilities should algo shorts come under pressure.”

“The current setup, however, has a decay over time. Barring a continued price increase, CTAs could return to supply by the end of next week, even in a flat band. That would take some pressure off the huge discretionary short.”