Potential Trade: Short Copper via JJC

Copper has been in a confirmed downtrend for a couple of months (like the general equity markets) and it's now at a good spot to enter a short position. For the purpose of this post, I'm using JJC as the vehicle instead of Copper Futures just because the etf is easier and more accessible to most people. Here's a daily chart of Copper (JJC) with some annotations: As you can see, JJC is overbought according to the stochastic while in a downtrend. This is the ideal point to enter a short. The prior lows from earlier in June make for a great initial target. There's one other factor that supports a short in copper--the Commitment of Traders Report. Here's a chart of Copper Futures with the Commitment of Traders plotted under the chart:
This chart shows that the large traders have been reducing their positions while the commercials (hedgers) are adding to their positions. In fact, the lines representing the two opposing groups has converged and is ready to cross--a bearish sign for Copper.

As an FYI, the direction of the large traders generally correlates to the direction of the underlying instrument..i.e. if hedge funds are selling, the price is likely falling. The opposite tends to happen with commercials as this group is mostly made up of large companies that use the futures market for hedging. Since these companies are hedging, they are generally going against the grain and prices tend to go in the opposite direction. Here's a great website if you're interested in playing with the Commitment of Traders charts for various futures.

Just some food for thought. As for the overall market, I'm still bearish right now and I am positioned for a further decline. We'll see. Hope everyone's having a great week so far.

TLT