Aluminium continues to rally amid CTA buying activity – TDS

Downside asymmetry is building, but it will take a big downtape to spark large-scale selling activity, TD Securities Senior Commodity Strategist Daniel Ghali notes.

Large-scale CTA buying activity continues

“We have reiterated the set-up in aluminium markets has been superior to that of the complex, with extreme asymmetries in algorithmic positioning still contributing to large-scale CTA buying activity. We expect that trend-following algos are now likely to cover their remaining shorts and build a net long position, resulting in a buying program totaling +11% of their max size this session.”

“That being said, this will likely mark the peak in algo buying for the time being, with our simulations of future prices now suggesting that the upside asymmetries in positioning risks that have supported the rally have likely completely dissipated.”

“Downside asymmetry is now building, but it will take a big downtape to spark large-scale selling activity. In this scenario, zinc appears most vulnerable to large-scale selling activity.”