LEONARD LUMBER REPORT: Open interest in the short fund category jumped 396 last week

The Market:

I have to lead with this fun fact. The Sept-Nov roll traded as high as +22.40. It started around -20 in early August and spent all of September positive.

Open interest in the short fund category jumped 396 last week. At 6,605, that is the most we have seen in months. The roll starts next week and will probably continue right up to expiration.

If you paid -17 and it only gets to -7, you pick up $10. When was the last time you made $10 on a car of cash? I’m just saying……

The focus is on the 10% reduction and the roll. Most likely, neither will have much effect on cash or futures. Put those to rest and move on.

Friday was a short-covering day on light volume. Nothing more and nothing less. That said, when you move that sharply there is always a chance for some nervousness and follow-through.

The technical read has a few positives now. On a weekly basis, closes through 546.70 and 552.00 would actually add some momentum to the buy side. With the stochastics nearing a positive cross, there is some upside room, but those levels need to be crossed first.

On the daily, the read is more positive in real time. The stochastics have crossed to the positive. We also saw the industry adding longs as the market broke.

A bottom is trying to form.

I’ll end with this. On Thursday, November futures hit $515, or roughly $393/mill. That is not sustainable. The industry stepping up to buy confirms the thought process, but when it is only the computer trading, the computer wins.

Daily Bulletin: