Palladium is having wild day, just how wild depends how you look at it.
At the time of this report, Palladium hit an intraday spot low of $1,441, down at one point over $100 dollars.
One Wall Street trader told me he believes it is commodity hedge fund selling which caused stop loss limit orders to be executed.
What I find fascinating is that at 1 pm EDT, over 9,600 June future contracts had changed hands, which represents forty percent of all the open interest in June.
Depending how you perceive this activity you can come up with many scenarios.
One can argue that the decline of over $100 is a big move, and yes that’s true. But the other side of the coin is one can argue that the volume generated from that sell off is not a big move at all.
That kind of volume in a historically thin market could have caused much more action to the downside. And so far it has not.
In the last few weeks, forwards have come in, one month lease rates have declined, and some metal has been finding its way into depositories. The question remains will this pattern continue or is this just the supply market catching up a bit.
One thing is for sure, trading this market requires a strong stomach and further volatility is almost a guarantee.
For the holders of long positions, stop loss orders are a must, because if more hedge funds start to liquidate watch out below.
Only time will tell how this plays out. In the meantime, pull backs can be healthy in in aggressively rising market. When fundamentals change ever so slightly in a thin market, volatility
can pick up, especially when hedge funds hold a majority of the positions.
One must remember the supply is still in a short fall and higher prices are not out of the question.
Enjoy the rest of your day.
Disclaimer: This editorial has been prepared by Walter Pehowich of Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.