Recap #
The decision to close JM2701 at the open on Monday was correct, as it surged that day, reaching a high of 1749 on Monday and 1763.5 on Wednesday.
Observations #
Indeed, on Monday, the last day for retail traders to trade JM2609, JM2701 surged violently along with JM2609. After that day, JM2609 fell a moderate amount. Although JM2701 didn’t fall as much as JM2609 in magnitude, we can see from the positioning data that the largest institutions are reducing their long positions. By Friday, CITIC’s net long positions had been reduced to less than 6,000, down from over 20,000 the previous Friday.
However, Yongan and Guotai Junan still hold the largest net long positions. I think JM2701 will not fall much until they leave the table.
In terms of fundamentals, I think they play a less important role than sentiment, at least last week. In the next few weeks, when the effects of the short squeeze fade, market attention will shift back to the marginal changes in Mongolian coal arrivals and hot metal production.
Plan #
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