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The Most Contrarian Pair Trade Today

Tyler Durden's picture




 

What has worked for much of the last two years, and judging by today's epic squeeze in stocks, is still working... is to bet against the most extreme positioning. So, on that basis, the following rather contrarian pairs trade should be ripe for major convergence...

 

Today saw yet another major short squeeze of stocks (tripling the broad market's performance and flushing yet another set of weak hands into covering higher into new record highs for stocks)...

 

This comes a week after the biggest negative swing in S&P 500 futures net total positioning in over 10 years...

 

But it is in commodity-land that we find our illustrious pair tonight...

The short leg will be... WTI Crude oil...

As BofA notes, Large speculators increased WTI crude oil longs to $38.8bn from $38.3bn notional.

Looking for a top. The gains of last week and closing break of the 21d avg (100.08) was unexpected. However, absent a break of the 104.48 Mar-03 high the larger trend remains bearish towards the Jan-09 lows at 91.35

And the long leg will be... Copper

Large speculators increase net short to -$2.5n notional from -$2.1bn last week.

So if you are truly a contrarian, being short oil (into potential minefields of energy-related sanctioning and retaliation) and long copper (into potential mass inventory dumping and liquification from a ultra-hypothecated deleveraging Chinese shadow banking system) is your trade du jour...

(or perhaps it was a premonition of tonight's earthquake in Chile's mining region)?

 

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Tue, 04/01/2014 - 20:46 | 4615675 VD
VD's picture

short the planet!

Tue, 04/01/2014 - 20:53 | 4615694 johny2
johny2's picture

planet will be fine.

Tue, 04/01/2014 - 21:00 | 4615715 kaiserhoff
kaiserhoff's picture

It's just a joke, and a good one,

  so why does that scare me?

Wed, 04/02/2014 - 03:00 | 4616341 0z
0z's picture

I didn't know long copper was a contrarian trade.

2003 it was 75 cents a pound; you'd still be up 4 times.

2008 was rough, but a very good buy.

Wed, 04/02/2014 - 03:47 | 4616385 Kirk2NCC1701
Kirk2NCC1701's picture

This is not Quantum Chromodynamics, people.  Moral:  Plan to buy or sell when there is a 20% departure from the Average (40% gain).  QED.

BTW, is "7 of 9"** ready for me on Holodeck 1?  Now those are some "Chicago Dairy Futures" I can believe in!

 

** Actress Jeri Ryan (7 of 9) is from Chicago.  Her GOP husband was leading the contest for the Illinois seat for US Senate, when the details of their divorce and messy allegations were brought to light (by a local media) and -- surprise, surprise -- some young, mulatto Community Organizer won the nomination for the Democratic party.  Barak something-or-other, I think.

Tue, 04/01/2014 - 20:55 | 4615699 Dr. Engali
Dr. Engali's picture

Looks like a good trade to me, however I chant get this peak oil thingy and potential war out of the back of my head.

Tue, 04/01/2014 - 22:06 | 4615894 Cannon Fodder
Cannon Fodder's picture

but, but, but the economist said there is plenty of oil when technology discovers it and the price point is right.... besides peak oil theorists are just tin foil hatters...

/sarc off.

Tue, 04/01/2014 - 21:01 | 4615717 kaiserhoff
kaiserhoff's picture

So much brain working, Tyler.

Just buy the fucking all time high.

Tue, 04/01/2014 - 21:02 | 4615719 juggalo1
juggalo1's picture

With all the stupid ETF concepts out there, why don't they have a "most shorted" ETF?  Buy, say, the top 100 out of the Russel 1000 stocks with most short as % of float.

Tue, 04/01/2014 - 21:06 | 4615730 Being Free
Being Free's picture

makes as much sense as any other trade in this fubar market.

Tue, 04/01/2014 - 21:24 | 4615777 gatorengineer
gatorengineer's picture

Sorry kids, I drank the coolaide, it really is quite tasty.  Long TNA.......

 

After watching emerging markets run for like 11 days straight against terrible China and Japan news...  I came to the realization, that they no longer need POMO to float the boat.  Facts are entirely irrelevant.   POMO was only required before the HFT programming got better, and more coordinated.  There is also certainly some monkey business going on with the fed balance sheet.  Now i am conviinced that excluding black swan events that they can put it wherever they want it....  and they want it up....  Looking for a run at 1900 tomorrow.  No shorts left in the way....  could see 1950 on a bad jobs report  Friday, on bad is good again....

Tue, 04/01/2014 - 21:32 | 4615810 icanhasbailout
icanhasbailout's picture

if you think that was good kool-aid now, wait about 20 minutes

Wed, 04/02/2014 - 00:56 | 4616219 dontknowcrapabo...
dontknowcrapabouteconomy's picture

you know, since I don't know crap about economy, all this tells me that EVERYTHING is rigged...or am I too paranoid?

 

Wed, 04/02/2014 - 02:45 | 4616327 Debugas
Debugas's picture

speculation = rigging

and yes every market is full of speculators

Wed, 04/02/2014 - 13:29 | 4617830 icanhasbailout
icanhasbailout's picture

You can speculate without cheating. Not necessarily advisable in the current environment, but the two are not necessarily the same thing.

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