Open Interest Analyst (OIA) is a commodity analytical service serving commodity trading advisors and hedge fund managers who want a tactical approach to analyzing commodity markets. OIA’s multifaceted analysis integrates fundamentals, seasonals, spreads and historical analysis when relevant to a current market.

OIA interprets the interaction between price, volume, and open interest (P-V-OI). Every trading day, we report on key commodities, and previous day’s volume, net change and the net change of final open interest. Our work is most effective for trend following and multi week time frames.

Although much of our work is defensive, e.g., letting clients know when we think it is best to stand aside, or take profits/losses, OIA issues Buy and Sell signals for short and intermediate term time frames. These are proprietary and not derived from a black box system. When a Buy or Sell signal is generated, usually there is a pullback lasting from one to two days, sometimes three. Occasionally, a Buy or Sell signal will reverse immediately, but this is unusual. 

Short term signals are based upon trading activity for the past 30 to 45 days and intermediate term signals, are based upon activity for the past 3-4  months. We provide the necessary guidance to take advantage of signals, while making recommendations about stop placement. We provide solid reasons for every position we recommend. If we think it is unwise to take a position, we are equally candid.

It cannot be emphasized enough that Buy and Sell signals are not points of action. For example, when a short-term Sell signal is generated, it typically reflects an oversold condition that eventually is corrected by a counter trend rally. The rally is the set up for initiation of bearish positions. The reverse is true for bullish positions. When a very bullish or bearish scenario exists, markets often make an extended move without correcting the OB/OS condition until several days later.

Below are some signals published by OIA. This is by no means a complete list and the latest signals are reserved for clients.

*Past results are not indicative of future performance.

OIA analyses each day’s price activity and its relation to volume and open interest increases or decreases, and whether these support or contradict price movement. We notify clients when unusual increases or decreases of volume and/or open interest occur.  Also, OIA informs clients when it sees consistent or variable patterns of volume/open interest and explains their impact on prices. Clients make buy and sell decisions knowing if and when price action is congruent with volume and/or open interest. This knowledge often warns of an impending move.

Market judgments based solely upon price action often are deceiving. OIA provides a decision-support tool that gives an inside view of each day’s trading activity.The report is data driven, and avoids the usual predictions and narratives that are counter-productive to high performance trading.The report compiles disparate, but relevant information on each commodity covered, and links this to market movements of (P-V-OI) of past days and weeks.

OIA approaches markets from the philosophy that it is better to stand aside, than participate in trades that could have sub-optimal outcomes. In paragraph four of the Bio, we list some characteristics of sub-optimal trades.  OIA defines a sub-optimal trade as one in which a loss is at least equally likely as a gain, whether long or short. Sub-optimal trades are common in futures due to high leverage inherent in futures trading. While the manager may be right about the ultimate direction of a particular market, short term swings adverse to the position can subject it to excessive loss in the interim. To succeed, managers must make adjustments in their trading style and wait for the absolute best opportunities. This is an overlooked area, but one that is critical to boost returns.

Over the longer term, money managers can out perform their competitors (with less risk) if they apply a rigorous screening process to prospective trades. New positions are entered only when the risk-reward and market set-up favor a positive result. Selection and timing of trades is the strong suit of OIA and our first priority is to evaluate prospective positions from a defensive point of view. Capital drawn down is capital that must be recovered before account(s) are able to generate revenue, which is why it is preferable to risk missing opportunities than risk losing money.

Although internally, we use a variety of charts and moving averages in different time frames to understand the strategic framework of markets, the emphasis of each report is data published by exchanges.The information provided by charts is integrated into our interpretation of (P-V-OI). Our discussion of fundamentals is targeted toward vital information that may have an impact on a particular market and the day’s analysis.

As part of our research, OIA tracks seasonal patterns to assess the probability of market behavior in a particular time frame.The results are especially useful in agriculture where the seasons for production and marketing have changed little in the post WW II period. Our analysis of inter-market and intra-market spread activity is another vital process that gives clients the edge. We provide relative strength analyses of price and open interest in combination with COT reports, which give clients a way of comparing strength or weakness among a group of commodities, or from one commodity to another.

You are welcome to call 415-440-1551 (San Francisco) for more information, or email us: garry@openinterestanalyst.com.

We look forward to working with you.