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The period covered by the COT report began at the lows and ended at the highs. The market continued higher for the remainder of the week and crashed on Friday. Nagual provides a great explanation but I would add that selling from commercials has been very intense, as we see on the COT. In addition, there has been new buying by both funds and large traders. Profit taking and continued selling touched off stops and caused an avalanche. Other factors likely included Friday liquidation and option expiration. It was no coincidence that the market met resistance at the 140.00 level. Large traders also added new shorts. The disaggregated total OI changed by a mere -287 lots while the price change was up 10.10c with a range of 13.60c. Yet, spreads were not the reason for the flat oi, as we see on the COT. It was a combination of outright new business and liquidation that caused the flat change. We see small changes every day on the OI report but we know that every sector is adding and subtracting on both sides.
What we see going forward is a variety of factors. On the COT, Index funds became essentially a non-factor. Other managed money caused the strength that we saw this period. Iíd like to think that Friday was not a reversal but a correction, and an opportunity. But this is more based on desire rather than any concrete indication. I will have to rely on Nagualís analysis rather than on my own instincts. On the other hand, Friday was a high outright volume day with 74% outright activity in March20. There was plenty of buying as the market fell which will likely continue. The question is, has the market sharp drop caused the funds to reverse their program to selling, rather than buying as they have been doing. After all, we havenít seen one solid reason for prices to have risen the way they have, not fundamental, weather related or otherwise. There may be a change of attitude by the investment community, but there are only possible indications of this for now. We will just have to see.
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