Advanced Positioning, Flow, and Sentiment Analysis in Commodity Markets, 2nd Edition

CHAPTER 11Newsflow in Positioning Analysis

Chapter objectives

• 11.1 Newsflow Data in Commodity Markets
• 11.2 Building Basic Newsflow Indices
• 11.3 Combining Newsflow with Positioning
• 11.4 Economic Policy Uncertainty

Newsflow analysis is a relatively new area of research, made possible by the growth in computing power, the existence of sizeable electronic news databases, and the proliferation of algorithms that allow articles to be automatically ‘read’ and tagged according to specific criteria.

Incorporating commodity newsflow into certain areas of commodity, Positioning Analysis can be useful in the following ways:

• Commodity positioning-related newsflow is important in helping to assess and track the current level of interest in positioning data. Like technical analysis, Positioning Analysis carries a degree of self-reinforcement, which can affect prices, shape sentiment, and influence behaviour. As positioning-related newsflow increases or decreases, the more or the less pronounced these positioning-related effects often become.
• When positioning is extreme in a commodity, the absolute level of commodity trading-related newsflow in that commodity, and also the direction of newsflow in terms of whether it is bullish or bearish for prices, can significantly affect behaviour. A large long or short position and bullish or bearish price-related newsflow respectively suggests the position could become bigger, or, if positioning is already extreme, less vulnerable to liquidation. ...