Buy The Rumor, Sell The News
We couldnโt have had a clearer example of this than last weekโs copper price action (and potentially what happened in the crypto space over the weekend...but that's for another time).
๐น Just moments after ๐ง๐ฟ๐๐บ๐ฝ ๐ฎ๐ป๐ป๐ผ๐๐ป๐ฐ๐ฒ๐ฑ ๐ฎ ๐ฆ๐ฒ๐ฐ๐๐ถ๐ผ๐ป ๐ฎ๐ฏ๐ฎ ๐ถ๐ป๐๐ฒ๐๐๐ถ๐ด๐ฎ๐๐ถ๐ผ๐ป into copper imports, the CME copper price spiked, closing the day up ๐ฏ% and dragging the CME premium over LME copper higher.
๐น Within ๐ฎ๐ฐ ๐ต๐ผ๐๐ฟ๐, the outright price, CME/LME arbitrage, and spreads eased as the initial panic subsided. Market logic returned as traders realized the US has ๐ฎ๐ณ๐ฌ ๐ฑ๐ฎ๐๐ ๐๐ผ ๐ฝ๐๐ฏ๐น๐ถ๐๐ต ๐๐ต๐ฒ ๐ฟ๐ฒ๐ฝ๐ผ๐ฟ๐ and another ๐ต๐ฌ ๐ฑ๐ฎ๐๐ ๐ณ๐ผ๐ฟ ๐ฝ๐ฟ๐ฒ๐๐ถ๐ฑ๐ฒ๐ป๐๐ถ๐ฎ๐น ๐ฎ๐ฐ๐๐ถ๐ผ๐ป. This led to profit-taking and outright selling, pulling prices back within recent ranges.
This pattern is common in commodities trading. Markets overreact to headlines before the full implications are understood, leading to extreme price movesโuntil calmer heads prevail.
๐ก Key takeaway:
Whipsaw price action like this can stretch margins and stop out even well-placed trades if not carefully managed. ๐๐ฟ๐ฒ ๐๐ผ๐๐ฟ ๐ฟ๐ถ๐๐ธ ๐ฐ๐ผ๐ป๐๐ฟ๐ผ๐น๐ ๐ฝ๐ฟ๐ฒ๐ฝ๐ฎ๐ฟ๐ฒ๐ฑ ๐ณ๐ผ๐ฟ ๐บ๐ฎ๐ฟ๐ธ๐ฒ๐ ๐๐๐ถ๐ป๐ด๐ ๐น๐ถ๐ธ๐ฒ ๐๐ต๐ฒ๐๐ฒ?
