Don't you think the COT OI increase represents new short sales? ................... .........
Not sure I understand the question - so I'll toss out everything and hope something hits the mark. Tell me if I am wide.
But to attempt an answer - Simply, I suppose so - in order to get Open Interest (OI) to increase one needs more contracts to be written and on each side is a long and on the other side of the contract a short. In a more general sense, as we saw in the July to September period we need a rise in POG to be supported by a rise in OI or bad things happen. Divergences are often key market indicators. So we have a detailed tool we can look at on a daily basis - the over all OI and front month OI.
But the "gods" scr*w us over in that the "detail" we need - the break down of who is doing what, is only reported once a week (less detailed). So we try to decipher "trend" info from this data.
That said, I have been looking at the weekly OI data with its reported categories for some time and looking at correlations as predictive. With the Commercial Shorts category the ST correlations are pretty tight with POG: on the order of 0.827 to 0.970.
[Hard to get longer term correlations as OI blew up in January when that hedgie dumped 80K of OI in one day. Then we had another ~80K "event" over several days after the 4th maintenance margin hike this year at the end of September and the dump as declining OI in the face of rising POG corrected. ]
The weekly COT report shows 3 weeks of declining Commercial Short OI. That suggests, on a weekly basis, that as POG drops Commercial Short OI drops also [shorts are covering]. The opposite then seems true and increase in Commercial Shorts on a weekly basis suggests an increase in POG. But remember this is one detailed snap shot of the market on one trading day (Tuesday) - not a composite, not the close of the week. Therefore, POG and OI frequently end the week quite different from that which gets reported in the weekly COT report.
Now, since we know Tuesday's over all OI, and it is up from the prior week, then it is probable that as of Tuesday, Commercial Short OI would be up slightly. This is what we should see on Friday evening when the COT report is out. So an increase in Commercial Shorts in this week's COT report - would be a bullish suggestion - problem is the BIG dump we saw in POG the following day and today's new low - all not rolled into this week's COT report.
Sure wish we had the COT Report kind of detail everyday!
So, putting the COT report in perspective we'll have to look at the over all OI and the day-to-day change, volume and OI, Volume and Change for the front month for the first clues and then look at the weekly COT report, in context, on Friday.
Does any of this make any sense?
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