Open interest increased by 11, 261 contracts and volume was 236, 635. Again there is a lot of conviction on the part of longs and shorts and the market is likely to move sharply once the crop report of January 12 is released. Although I am bullish for the next couple of months, I would recommend standing aside at this juncture
March crude oil closed $.25 lower and open interest increased by 3, 792 contracts. Volume was 565, 386 contracts. This market is likely to correct down to its 50 day moving average of approximately 97.90. Major areas support can be found at 95.90 and 93.23. As I’ve always said, geopolitical disruptions can change the dynamics of this market on a dime.
Gold’s high was 1632.3 on Friday and this was a new high for the move. Gold closed 3.30 lower on volume of 165, 504 contracts. The interesting aspect of golds market action on Friday was that the open interest decreased by 2,516 contracts. Since the gold rally began on December 30, it has rallied from a low of 1546.4 on December 30 to a high of 1632.3 on the January 6 four total of 85.90. Yet open interest has declined a total of 4,215 contracts during these five sessions. This is bearish. Although I am bullish longer-term, it cannot be ruled out that a retest of the 1523.90 area will occur. The previous low in gold was 1535 on September 26, 2011 which indicates that there is support and value in the low 1500 area. For quite some time, gold was highly correlated to the major indices. It now seems to decoupled and is trading on its own supply and demand dynamics.
Silver closed $.61 lower on volume of 41, 419 contracts. Open interest increased just 55 contracts. From the low of 26.14 made on December 30, 2011 through January 6 open interest has increased 544 contracts. This is mildly constructive and it is very possible that we will see a low in silver before we see the final low in gold.
The Euro reached a new low for the move at 127.03. The decline was 63 points on volume of 227, 315. Open interest declined 5,070 contracts. This is the first time since December 29, 2011 that open interest declined when prices declined. The previous time was on December 21 when the December euro contract went off the board. A decline in open interest when prices are going down indicates that both longs and shorts are closing out previous positions. One day doesn’t make a trend, but if we continue to see open interest decline since price declines we could be getting close to near-term bottom. This market is massively oversold with a huge number of net spec shorts. Extreme caution is in order for anyone who is short this market.
The S&P 500 E Mini closed up 1.25 points on volume of 1,692, 928 contracts. Open interest declined 9, 082 contracts. Since the Santa Claus rally began on December 20 through the 1282.25 high made on January 6, open interest has increased only 44, 054 contracts. The range from the low made on December 20 through the high made on January 6 is 83.50 points. With open interest increasing only 44, 054 contracts, it is apparent that this rally lacks conviction. The low volume of the rally also is confirmation of the lack of enthusiasm on the part of speculators. The high reached on Friday of 1282.25 matches the high made on October 27 of 1283. If the market is unable to move significantly above that 1283 level on high volume, this market is headed south.
10 Year Treasury Notes:
The note market increased eight points on Friday on volume of 931, 955 contracts. Open interest increased by 10, 885 contracts. This indicates that both new buyers and new sellers are coming into the market and that the buyers are in control. Until yields and treasury note prices reach the targets that I specified in my Sunday wrapup, this market looks to move higher.