Wednesday, December 10, 2014

U.S.F.I.; Price and Open Interest Point to Bearish Overthrow

Yesterday early we looked at the JPM Tsy Client Survey ‘active’ class and noted movement from the sideline (‘neutral’) to short (8% to 25%) and suggested that short participation would continue to rise, though maybe not as much as the 69% of mid-September. 


Open interest declined by a rather large 92K in Eurodollars and by 38K across the Treasury futures as a result of trade on Monday, which tends to discount the bullish implications of that sessions slightly advancing prices.  Open interest declined further as a result of trade on Tuesday during another weak price advance.  Open interest declined by 131K in Eurodollars (129k for EDH5) and by 57k in Treasury futures. 


Contrasting declining open interest of the last two sessions which accompanied weak advancing prices with the Friday’s rise in open interest of 180k Eurodollar and 50k Treasury future during dramatic price weakness and the picture becomes rather clear that the short contingency is retaking control.  Longs are looking to exit and shorts are due to become more emboldened by the lack of any significant recovery despite recent advancing attempts. 


Finally, we should note also that advancing price action of the last two days has failed to retake even half of the open to close declines from Friday in the more active Front and Red Eurodollar Strips.  This is another indication of the weakness in the two session advance.     


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