When the entire crowd is making the same bet, it’s smart to do the opposite.

That’s the simplest description of contrarian investing. It works because once everyone believes in an outcome, there’s no one left to keep pushing prices in that direction.

Today, we see that happening in a certain commodity. The bearishness started earlier this year. And it’s only gotten worse in recent months.

Now the setup is the craziest we’ve seen in nearly two decades. And it means this beaten-down commodity is on the verge of a major move higher.

Let me explain…

Bearish bets on palladium hit crazy levels in May 2020…

Folks were the most bearish they had been on the metal in over a decade. As I explained in DailyWealth, record bearish bets often mark a turning point in a trend… and a rally in the metal was likely.

Palladium took off after that initial signal… for a 56% gain in a year. And now, the metal is set up to do it again.

Investors are betting against palladium at crazy levels once more. We can see it through the Commitment of Traders (“COT”) report for the metal.

The COT report is a weekly survey that shows us what futures traders are doing with their money. This tool doesn’t give us much insight during normal times. But when futures traders are betting at extremes, it’s a great contrarian indicator.

That’s because collectively, these traders are terrible market timers. If they’re all betting in one direction, the opposite is likely to occur.

Today, bearish bets on palladium are the highest they’ve been since 2002. Take a look…

You can see bearish bets on palladium hit a nearly two-decade low late last month. Futures traders have given up on the metal in record numbers.

We’ve seen similar setups throughout the years, most recently in 2020. And each time led to fantastic upside. Check it out…

Again, the COT report showed wildly bearish bets on palladium four times in the past decade. But rather than falling further, the metal took off in each case…

Palladium climbed 33% following extreme bearishness in 2012. That was followed by two similar cases, each of which led to 60%-plus rallies in the metal… not to mention the 56% move after last year’s opportunity.

In short, sentiment toward palladium is as bearish as it gets. And if history is any indicator, a rebound in the metal is likely.

You’ll want to wait for palladium prices to rebound before buying. They’re still trending lower right now. But once that happens, be ready for a big surge higher.

Good investing,

— Chris Igou

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Source: Daily Wealth