📅 2026-10-08 · PP · Single-name brief Legacy coverage

This report is provided by MacroTerms.com

Data as of: 2026-09-30 · Settlement: Exchange settlement (15:00 Beijing close, vs prior settlement)

DCE Polypropylene Continuous (DCE.PP) In-depth Analysis Report | Slightly Bullish: Position-Cut Rebound and Weekly Stabilization | 2026-10-08

Direction: Slightly bullish. Core logic: 1) The main contract PP2701 saw a notable rise on reduced open interest after the [2026-09-30 settlement], with short covering pushing the price above the lower edge of the 20-day channel;
2) Weekly timeframe found support at 8631, showing signs of technical stabilization;
3) At the macro level, the oil-gold ratio is at a low, implying energy costs are providing a floor for chemicals. Invalidation: If the daily close effectively breaks below 8538 (S1 pivot), the trend turns weak.

I. Bottom Line & Directional Bias

Bias: Moderately Bullish

Based on the current data structure and market behavior, we maintain a moderately bullish view on Dalian Commodity Exchange Polypropylene Main Continuous (DCE.PP, active contract PP2701). The core bullish logic rests on three pillars. First, price action exhibits clear short-covering characteristics. On the basis of the [2026-09-30 settlement] at CNY 8,573/t, the main contract rose while open interest declined, with notional open interest falling by CNY 1.271bn. This indicates that longs were not aggressively adding positions; rather, shorts actively exited at a key support level. Such “rising on open interest cut” tends to be more sustainable than “rising on open interest build,” as selling pressure has been substantively absorbed. Second, from a technical standpoint, price has firmly held above the 20-day channel lower bound (CNY 8,314/t) and rebounded to the 33rd percentile, while the weekly chart printed a long lower shadow at CNY 8,631/t, signaling strong buying support below. Third, on the macro cost side, the Oil/Gold ratio sits at the 92.06th percentile over one year; although the reading is low, combined with the crack spread (Crack 3:2:1) of USD 69.72/bbl, it implies that crude oil's cost support as PP's upstream feedstock remains solid, limiting downside space for PP.

Bias Invalidation Condition: If the daily close effectively breaks below CNY 8,538/t (S1 pivot), the short-term bullish thesis is invalidated and the validity of lower support must be reassessed.

II. Price Action & Technicals

Price Pattern & Momentum

As of the [2026-09-30 settlement], DCE.PP Polypropylene Main Continuous closed at CNY 8,573/t, up 0.26% from the previous trading day. Over a longer horizon, the 5-day gain stands at +0.57% and the 20-day gain at +3.24%, indicating that the short-term trend has turned bullish. The current price sits at the 33rd percentile of the 20-day channel (CNY 8,314–9,275/t), meaning that after rebounding from the 20-day low of CNY 8,314/t, price remains in the lower half of the channel; upside room remains, but it has not yet entered overbought territory.

Volatility & Pivots

ATR14 is CNY 253.36/t (approximately 2.94%), indicating a wide intraday range and active market sentiment. RV20 stands at 25.7%, further confirming that recent volatility is at a relatively elevated level. The pivot system shows the P point (pivot) at CNY 8,603/t, R1 (first resistance) at CNY 8,696/t, and S1 (first support) at CNY 8,538/t. The current settlement price of CNY 8,573/t lies between P and S1, slightly below P but above S1, placing it in a key battleground zone. If price can hold above CNY 8,603/t, it may challenge the R1 resistance at CNY 8,696/t; conversely, a break below CNY 8,538/t could open the door to further downside.

Weekly Status

This week (2026-10-05 to 2026-10-09) has not yet closed, so we can only cite the most recent completed weekly bar (2026-09-28 to 2026-09-30). That weekly bar opened at CNY 8,600/t, hit a high of CNY 8,689/t, a low of CNY 8,510/t, and closed at CNY 8,631/t, with a weekly change of 0%. Notably, the weekly low of CNY 8,510/t approached the 20-day channel lower bound of CNY 8,314/t, and the close at CNY 8,631/t shows that the weekly timeframe found strong support near CNY 8,510/t, forming a “lower shadow” structure, which is typically a bottom-reversal signal.

Night Session & Intraday

Night session data for the report date (2026-10-08) shows an open of CNY 8,800/t, a high of CNY 9,257/t, a low of CNY 8,750/t, a close of CNY 9,242/t, and a settlement of CNY 9,074/t, a single-day gain of as much as 7.8%. This sharp move indicates that market sentiment shifted significantly ahead of the weekend, with long forces being released in a concentrated fashion during the night session. However, since the report date has not fully closed, we must remain vigilant against the risk of a high-open, low-close in the night session, though the overall trend still leans bullish.

Technical Conclusion

Overall, PP2701 has exhibited a “rising on open interest cut” pattern following the [2026-09-30 settlement], with the weekly chart finding support at CNY 8,510/t and the night session breaking out further. Technically, price sits at the 33rd percentile of the 20-day channel, ATR14 shows elevated volatility, and pivot S1 (CNY 8,538/t) is the key defensive level. If price holds S1, it may advance toward R1 (CNY 8,696/t) or even the 20-day high of CNY 9,275/t.

III. Supply-Demand Balance & Fundamental Drivers

Inventories & Warrants

Main notional open interest stands at CNY 25.30bn, with a daily change of -CNY 1.271bn, corresponding to a decrease of 29,447 lots. A sharp decline in open interest alongside rising prices typically implies short covering rather than active long positioning. Such “rising on open interest cut” often occurs during a short-covering phase, suggesting that previously accumulated short pressure is being released and the supply-demand imbalance may be easing.

Basis & Processing Margin

PP2701 rebounded significantly after the [2026-09-30 settlement], with an even sharper rise in the night session, which may reflect a recovery in downstream demand or a contraction in upstream supply. If the basis (spot minus futures) is within a reasonable range, the futures rally is supported by the physical market; if the basis is excessively wide, there may be convergence risk between futures and spot. Currently, price sits at the 33rd percentile of the 20-day channel and has not entered overbought territory, indicating that fundamentals have not yet become severely imbalanced.

Macro Transmission

At the macro level, the Oil/Gold ratio sits at the 92.06th percentile over one year; although the reading is low, combined with the crack spread (Crack 3:2:1) of USD 69.72/bbl, it implies that crude oil's cost support as PP's upstream feedstock remains solid. Crude oil price fluctuations transmit through costs to influence PP pricing. In addition, the U.S. Dollar Index (DXY) stands at 102.14 and the 10-year U.S. Treasury yield at 5.23%; both indicators are relatively stable with no sharp moves, limiting macro shocks to chemicals.

Seasonality

Seasonal data show that over the past 12 years, the average gain for the same date over the following 20 trading days is -2.65%, with a median of -1.38%, and only 4 of 12 years posted gains. This suggests that the current point in time is not a traditional seasonal up-window, though market behavior often deviates from historical patterns. The current rebound may be driven more by short-term capital flows and short covering than by a seasonal demand surge.

Supply-Demand Conclusion

Overall, PP2701's supply-demand balance is likely in a “short-covering” phase: the price rebound has cost support, but lacks strong spot demand drivers. Investors should monitor subsequent inventory data and warrant changes to verify whether supply and demand are genuinely improving.

IV. Positioning & Fund Flows

Top-20 Seat Holdings

As of [2026-09-30], the top 20 seats held a combined 780,129 lots, with a net long of 52,698 lots, down 9,016 lots on the day. This indicates that although the top 20 seats remain net long overall, the net long size is shrinking, suggesting some weakening of long forces. However, given the sharp decline in main notional open interest (-CNY 1.271bn), the reduction in net longs may be more a result of short covering than active long exits.

Nature of Main Holdings

Main notional open interest is CNY 25.30bn, with a daily change of -CNY 1.271bn, corresponding to a decrease of 29,447 lots. A sharp decline in open interest alongside rising prices is a classic “short-covering” signature. Short covering typically occurs after prices fall to a key support level, forcing shorts to close at a stop-loss and thereby pushing prices higher. This shift in positioning structure supports price and indicates that market sentiment is turning from pessimistic to optimistic.

Implied vs. Realized Volatility

ATR14 is CNY 253.36/t (2.94%) and RV20 is 25.7%, showing that realized volatility is elevated. If implied volatility exceeds realized volatility, the options market may be pricing in higher risk; if lower, risk may be underestimated. With price at the 33rd percentile of the 20-day channel and volatility high, investors should be wary of short-term swings.

Fund Flow Conclusion

Overall, net longs at the top 20 seats have declined, but main notional open interest has fallen sharply, indicating that short covering is the dominant driver. This shift in positioning structure supports price, though long forces have not strengthened significantly. Investors should watch subsequent positioning changes; if net longs begin to rise, it may signal active long positioning and a more durable trend.

V. Cross-Asset Relative Value & Global vs China Markets

Relevant Relative Value Ratios

Among them, the oil-to-gold ratio sits at the 92.06th percentile over 1 year and the 47.88th percentile over 3 years, indicating crude oil is at historically elevated levels relative to gold, which may suggest strength in the energy complex. The copper-to-gold ratio sits at the 96.83rd percentile over 1 year and the 56.61st percentile over 3 years, showing copper is also at relatively high levels versus gold, potentially reflecting robust demand for industrial metals.

Gold-Silver Ratio & Copper-Gold Ratio

The gold-silver ratio of 69.95 stands at the 80.16th percentile over 1 year and the 26.72nd percentile over 3 years. A high gold-silver ratio typically implies gold is outperforming silver, or silver is underperforming gold. The ratio is currently at a 1-year high, yet its 3-year percentile is low, suggesting silver may be relatively firm over the longer term. The copper-gold ratio of 1.58 sits at the 96.83rd percentile over 1 year and the 56.61st percentile over 3 years, showing copper at historically elevated levels versus gold; this may reflect strong industrial metals demand and provides indirect support to chemicals.

Global vs China Market Premium

An elevated oil-to-gold ratio may imply crude oil is outperforming gold, and as crude is the primary feedstock for polypropylene, oil strength could influence PP pricing through cost pass-through. In addition, the US Dollar Index (DXY) stands at 102.14, relatively stable with no sharp swings, limiting its impact on global-vs-China price spreads for chemicals.

Cross-Asset Conclusion

Taken together, the elevated oil-to-gold and copper-gold ratios may provide cost support for polypropylene. The high gold-silver ratio hints at relative silver strength, which could weigh modestly on gold but has limited impact on polypropylene. Investors should monitor crude oil and copper price action to gauge the pricing logic for polypropylene.

VI. Supply Chain & Seasonal Inventory (Historical Statistics & Seasonality)

Based on historical statistics covering the same calendar date over the past 20 trading days across 12 years, DCE polypropylene main continuous (DCE.PP) exhibits clear seasonal divergence in the 2026-10-08 window. The sample spans 12 full years from 2014 to 2025; the data show an average return of -2.65% and a median return of -1.38% for this window, indicating that, historically, this point tends to face seasonal pullback pressure rather than a traditional peak-season rally. Across the 12-year sample, only 4 years posted gains, an up probability of roughly 33.3%, while down years dominated at 66.7%. The best-performing year was 2016, with a gain of +9.17% over the same period, driven mainly by a sharp rebound in crude oil that bolstered cost support; the worst was 2021, with a decline of -14.44%, hit by global supply-chain disruptions and a high base effect. Notably, although the historical statistics skew bearish, the current market structure has changed markedly: price action and fund flows show strong short-covering, which may mean the seasonal pattern is temporarily invalid under the current macro and supply-demand backdrop. Investors should treat seasonality as background noise rather than a decision driver; the focus should remain on how price responds to key support levels and changes in positioning structure. Historical data are for risk reference only; actual moves must be assessed in conjunction with real-time market dynamics, and mean-reversion logic should not be applied mechanically.

VII. Scenario Analysis

Based on the current market structure and data characteristics, we construct three scenarios, with probability allocation following a risk-return matching principle. Base case (probability 50%): price extends the short-covering logic and grinds higher while holding the S1 pivot at CNY 8,538/t. Trigger: daily close does not break below CNY 8,538/t, and night session or intraday price holds above CNY 8,631/t. Target: R1 resistance at CNY 8,696/t; if breached, a further challenge of the 20-day high at CNY 9,275/t. Corresponding action: hold existing long positions; add modestly on pullbacks toward CNY 8,631/t; set stop-loss at CNY 8,327.8/t. Bull case (probability 30%): an upside surprise in macro or cost factors pushes price through key resistance. Trigger: daily close breaks decisively above CNY 8,696/t with a simultaneous rise in open interest, signaling active long building. Target: the 20-day channel upper bound at CNY 9,275/t, or higher. Corresponding action: chase longs after breakout confirmation; move stop-loss up to CNY 8,538/t; trail the target dynamically. Bear case (probability 20%): short-covering ends and price retests lower support. Trigger: daily close breaks decisively below CNY 8,538/t (S1 pivot) with a notable increase in open interest, signaling shorts regaining control. Target: the 20-day low at CNY 8,314/t; if breached, further downside. Corresponding action: close longs; if the break of CNY 8,538/t is confirmed, try shorts with a light position, with stop-loss above CNY 8,631/t. The three scenarios sum to 100%; the base-case direction is consistent with the earlier conclusion, maintaining a modestly bullish bias, with the invalidation condition strictly defined as a daily close below CNY 8,538/t.

VIII. Trading Strategies & Risk Management

In line with the established strategy framework, we execute two long setups, both based on risk budget and ATR multiples. Plan 1: long entry at CNY 8,631/t, stop-loss at CNY 8,327.8/t, target at CNY 9,086/t, horizon 1–2 weeks, risk-reward ratio 1:1.5. Stop distance of CNY 303.2/t equals 1.1× ATR (ATR14 275.57); contract multiplier 5; risk per lot CNY 1,536 (including fees and slippage); single-trade risk budget of CNY 6,693 implies a reference cap of 4 lots. Plan 2: long entry at CNY 8,696/t, stop-loss at CNY 8,392.8/t, target at CNY 9,151/t, horizon 1–5 days, risk-reward ratio 1:1.5. Stop distance is likewise CNY 303.2/t, equal to 1.1× ATR (ATR14 275.57); contract multiplier 5; risk per lot CNY 1,536 (including fees and slippage); single-trade risk budget of CNY 6,693 implies a reference cap of 4 lots. Stop levels at CNY 8,327.8/t and CNY 8,392.8/t are set to cover 1.1× ATR of volatility, avoiding triggers from normal market noise. Position sizing strictly adheres to the single-trade risk budget cap to keep risk on any one trade controlled. Add/trim rules: if price moves toward the target without hitting the stop, hold to target; if price breaks key resistance at CNY 8,696/t, consider adding modestly on top of Plan 2, provided total exposure does not exceed the single-trade budget. If price breaks below CNY 8,538/t, close all long positions immediately and reassess the market structure.

IX. This Week's Data Calendar

Beijing time 10/14 09:30, China will release CPI y/y and PPI y/y data; forecasts and prior values are both blank. The data are highly relevant to the black, nonferrous, and chemicals sectors. In addition, US Eastern time 10/13 21:30, corresponding to Beijing time 10/14 09:30, the US will publish CPI y/y and PPI y/y data, likewise with blank forecasts and prior values, potentially disrupting global commodity pricing. Investors should watch market reactions after both releases, especially the impact on polypropylene cost support and demand expectations. No other major events are currently on this week's core calendar; we recommend continued tracking of crude oil volatility and changes in China inventory data.

This report is generated automatically from public quantitative and macro data for research and market tracking only. It does not constitute any investment advice.

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