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Anon 'Oat'
In this case OI was NOT an indicator of the rally to come, but rather of the
robust health of the prior [and far more substantial] downtrend.
In fact, after the short covering rally in beans [btw oct-nov] the market
proceeded to fall like a lead weight. Had the OI been declining throughout
the prior price decline, we could have said that the health of the bear
trend was in question. If as you say the OI was increasing, then the only
[and i do mean ONLY] conclusion that is possible is that new shorts were
being established in the face of lower prices. The bears were in control
and the market subsequently proved it.
OI rising during a "sideways to down market" is NOT usually indicative of a
rally to follow. If anything it reflects commercial bearish-ness, fund
shorting, or combo. Commercials [being the 'smart' money] cover their short
hedges when they believe prices will rise, not fall. This usually causes a
decrease in total OI, not an increase.
Granted, much of OI interpretation is subjective. and OI does not by itself
indicate who is buying or selling futures, only 'commitment of traders'
report can do that.
-----Original Message-----
From: OatTrader@xxxxxxx <OatTrader@xxxxxxx>
To: Omega-list@xxxxxxxxxx <Omega-list@xxxxxxxxxx>
Date: Sunday, April 04, 1999 4:27 PM
Subject: Re: Volume?
:RT's,
:
: The only good I see in open interest that I find as useful is when a
:market is drifting sideways to down and the open interest starts to rise.
:This is telling me that the commercials are starting to accumulate long
:positions in earnest. An example would be starting in December in Soybean
Oil
:the open interest is starting to rise and it is obvious that prices are
still
:declining. This same rise occurred in Soybeans in July 1998 to October
1998,
:prices had gone down and the accumulation was on and prices rallied 75
cents.
:Oat
:
:
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