You would definitely want to account for that quarterly roll for the purposes of practical usage. It’s a very obvious pattern.

I won’t disagree with the idea that short liquidation into what could have been perceived as a bottom. That makes perfect sense. It’s coming out the other side, though, where you’d like to see OI rising as long players started coming in. That’s not happening and it continues to be the small players who are the most bullish (looking at the COT figures for the mini S&Ps).

I was looking at SPs, but the numbers I have are spot, OI, volume, and then the OHLC for continuous contract backadjusted, so I’m not totally sure about the volume and OI numbers, I would assume they’re a total or mix from the contracts used for the continuous adjustment — highs were just after the March lows so could have been rollover — would probably want to adjust for seasonality if the rollover spike is a quarterly event — it’s gets bigger and bigger as you think about it — for something I wouldn’t trade on.

I’m still thinking the increasing evidence of a bottoming is what drove the OI down, when compared to volume and OI in a market price downturn and fears of an economic collapse. If that’s the meme, than the lower OI goes along with futures traders believing we’ve bottomed – and whether that’s bullish or not is a smart money/dumb money sentiment issue.

That also coincides to the high volume periods in the futures as volume in the contracts also tend to ramp into the rollover.

But to me the more interesting view is what’s going on in a more general view. In particular, the post Dec. rollover low was much lower than previous troughs, and that month’s high was also much lower. (I’m looking at the full S&P contract, not the minis here). That’s the point I was making about the market’s deleveraging around year-end.

After the Dec low, OI did rise into late Jan., but then went flat until right before the rollover when it ran up aggressively. That peak was higher than the Dec one, and the following trough afterward was as well. Both, though, are lower than the ones before December. And while there was a bit of a pick up in OI into the end of March, it has actually been drifting lower all April.

In terms of testing, I wouldn’t test OI against price change by itself. I would use it with volume. For example, if volume is increasing and OI is not, that means position churning.

Volume isn’t OI.

Again, the peak volume of contracts was at the retest, which is where everybody’s betting on that reflection point – it makes sense that, as they settle into recognition of a bottom and support, speculation would slow down.

FWIW, I have seen only tenuous and untradeable correlations in past changes to OI versus future changes in futures prices, but I’ll take a brief look to see if changes in OI tend to reinforce price trends, one way or another.

OI rising means that new longs AND new SHORTS are being established.

Every contract of OI is a long and a short position. What you’re seeing is a decrease in speculative interest on BOTH sides as OI decreases; I don’t know if that is bullish or bearish in and of itself …