This has been the constant theme for the entirety of this new year and it continued again this past week in the Oil markets.

Here is a breakdown of the LARGE SPECS positions.

The hedge funds have covered a whopping 136,500 short positions since the start of the year bringing their outstanding short positioning to the lowest level since early June 2015.

If you include the Other Large Reportables, the reduction in overall short positions among these powerful large speculators is even more dramatic. Together they have liquidated/closed out/covered 160,598 total short positions since the new year began.

What is also revealing is the CONTINUED LACK OF NEW AGGRESSIVE BUYING.

The number of hedge fund long positions has barely budged over the last 6 weeks. In actuality is is SMALLER this week than it was six weeks ago!

This is further confirmation of something we have been noting here for a while now – the recovery in many individual commodity markets, but especially the oil,has not been led by fresh longs/influx of hot money, but rather a closing out of existing bets on lower prices.

This is why I am very cautious about getting bulled up on some of these markets. Short covering produces huge moves higher in price, especially if the short side trade has been very crowded as it had been in oil, but that is a far cry from transitioning to a rip-roaring bull market.

My interpretation of this is something I have written repeatedly this year – traders playing the short side of many of these markets seem unwilling or hesitant to press them into new lows in the face of obvious reflation efforts by the Central Banks ( negative interest rates, ultra low rates, dovish Fed, etc.) based on the axiom that one cannot fight the Fed ( central banks) and expect to win. On the other hand, the efforts by these same Central Banks has largely proved ineffectual in achieving their stated goal of producing economic growth of a rate strong enough to generate an annual inflation rate of 2%.