The COTS data provided by the government includes the Open Interest charts.

Open Interest can be used to confirm a trend. If the Open Interest is rising, and the price is rising, this generally signifies confirmation of an up trend. So what is Open Interest? It’s a little tricky but essentially if a new Long trader enters a trade with a new Short trader, then Open Interest goes up by 1. On the other hand, if the trader with the long position sells it to another trader wanting the long position, the Open Interest doesn’t change.

Use this tool to look for trend conformations. Also be weary if you see high Open Interest near market tops as this can signify a reversal.

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