Extremely Unbalanced Long Bond Market

While massive net outflows in the Treasury bond market by connect players as open interest spikes doesn't necessarily imply a immediate trend change, it does reflect an extremely unbalanced market. An extremely unbalanced with rising open interest (participation) tends to associated with hot markets. Hot markets can be extremely dangerous.

Those familiar with the probabilities of statistical Z scores from a normal distribution understand the rarity of +/- 3 Sigma reading. The enclosed link to Z-score applet with help those less familiar. The most recent COT data generated a -3.04 2-year trend Z-Score.

Lower Money Flow Table:


The following chart illustrates the spike in participation into hot market.

Long-Term U.S. Treasury Bond and the COT Futures and Options Open Interest Stochastic Weighted Average: