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Posted by Tango
on December 2, 2019, 8:08 pm
After a sharp correction on the last day of the previous report, the market resumed its upward climb to again end the COT week with another sharp correction. The report confirms what was suspected - that funds are now net long. However, managed money is still covering shorts and the new buying Is being done by Index funds. Long liquidation is mostly being done by commercials. Small traders had big liquidation on both sides, probably mostly spreads. But in spite of all this liquidation, the OI each day shows increases. We can see why by looking at the new spread activity. Specs added over 11,000 spreads. The supplemental shows a large increase in option spreads as well by commercials.
We have not had a sharp correction for almost a week. Any weakness has been fairly shallow and temporary. Of course we see that resistance is present, mostly by commercials, mostly option related but partly origin selling as well. There is quality buying and the more the market strengthens the more funds join in to cover. Itís foolish to say that the market will not reverse but for now there are are fundamental reasons that will sustain higher prices. Certified stocks are dropping sharply and exports are high both indicating greater demand. Also, it appears that the investment environment is reversing positively.