Coffee: On the February 10, March and May coffee generated short-term sell signals, which reversed the February 4 short-term buy signals. Both contracts remain on intermediate term sell signals.
WTI crude oil:
March WTI crude oil lost 49 cents on record volume of 1,746,219 contracts. Total open interest increased by 28,161 contracts, which relative to volume is approximately 35% less than average, however the March contract lost 60,061 of open interest, which means there were more than enough open interest increases in the forward months to offset the decline in March and increase total open interest.
Yesterday’s action confirms the bearish set up for crude oil and the March contract made a new contract low of $27.24. As this report is being compiled on February 11, the March contract is trading 56 cents below yesterday’s close and has made another contract low of 26.22. This is the lowest print since 26.65 made during the month of September 2003 on the monthly continuation chart. Although it has come close, March heating oil has not reversed the short-term buy signal of February 8 and remains on an intermediate term sell signal. Gasoline remains on short and intermediate term sell signals.
The March euro lost 6 pips on volume of 268,736 contracts. Total open interest declined by 3,774 contracts, which relative to volume is approximately 40% below average. As this report is being compiled on February 10, the euro is rocketing higher, up 74 pips and has made a new high for the move of 1 1385, which is the highest print since 1.1378 made on October 22, 2015. On February 4, the March euro generated short and intermediate term buy signals, however we continue to recommend a stand aside posture. We think the euro will trade higher as long as equity markets continue to decline, but the long side of the euro is risky.
The March yen advanced 102 pips on heavy volume of 316,903 contracts. Volume was the strongest since February 3 when the March contract gained 170 pips on volume of 333,647 contracts and total open interest declined by 5,752. On February 10, total open interest increased by 2,506 contracts, which relative to volume is approximately 55% below average, but the open interest increase confirms that new buyers are flooding into the yen and driving prices higher (.8847).
As this report is being compiled, the March yen has exploded higher, trading up 114 pips and has made a new contract high of .9017, which is the highest print since .8887 made during the week of November 3, 2014. Looking at the chart, there are appears to be no resistance until the high of .9510 made by the December 2014 contract the week of October 13, 2014. We continue to advise a stand aside posture in the yen because it is too volatile and risky to trade. On February 4, OIA announced that the March yen generated short and intermediate term buy signals.
April gold lost $4.00 on volume of 175,481 contracts. Total open interest increased by 524 contracts, which relative to volume is approximately 80% below average. As this report is being compiled on February 11, the April contract is trading sharply higher, up $52.10 and has made a new contract high of 1263.90, which takes out the previous high print of 1245.00 on the weekly chart made during the week of February 2, 2015.
On January 7, OIA announced that April gold generated a short-term buy signal and an intermediate term buy signal on January 26. For those clients who entered bullish positions after the generation of the signals, we recommend the initiation of positions to protect of profits.
Consider shorting out of the money calls to capture the rich premium created by the spike in volatility and/or initiate bear put spreads, (purchasing long puts and selling further out of the money puts), or bear put ratio spreads (purchasing 1 long put and selling 2 further out of the money puts). This will enable clients to reap profits if gold prices continue to advance, but protect them against the inevitable correction, which will occur after a sufficient number of new longs have entered the market.
March silver lost 16.7 cents on heavy volume of 79,478 contracts. Total open interest declined by 3,519 contracts, which relative to volume is approximately 75% above average meaning liquidation was substantial on yesterday’s modest decline. As this report is being compiled on February 11, the March contract is rocketing higher by 52.3 cents and has made a new high for the move of 15.99, which is the highest print 16.37 made the week of October 26, 2015.
The March contract is a distance from taking out its contract high of 17.856 made on May 18, 2015. On January 26, OIA announced that March silver generated a short-term buy signal and an intermediate term buy signal on February 4. Like gold, we recommend to clients who are long silver from lower levels that profits be protected by shorting out of the money calls and/or initiating bear put spreads, or bear put ratio spreads.
10 Year Treasury Note:
The March 10 year treasury note advanced 6 points on volume of 1,823,672 contracts. Total open interest increased by 24,013 contracts, which relative to volume is approximately 45% below average, but an open interest increase on yesterday’s advance indicates that buyers continue to flood into the 10 year note and driving prices to a new high for the move of 131-245, which is slightly above the February 9 print of 131-240.
As this report is being compiled on February 11, the March 10 year note is trading sharply higher up 22 points, or 0.55% and has made a new contract high of 133-015, which is the highest print since 132-315 made the week of May 6, 2013. On January 6, OIA announced that the March 10 year note generated a short-term buy signal and an intermediate term buy signal on January 14. The market is massively overbought, and though a correction is inevitable, it is difficult to determine when this will occur, especially when all markets are in a risk off environment. For those long at lower levels, we recommend long puts or bear put spreads to protect profits.
S&P 500 E-mini:
The March S&P 500 E-mini lost 1.55 points on volume of 2,373,516 contracts. Total open interest increased just 6,556 contracts. As this report is being compiled on February 11, the March contract is trading sharply lower, down 34.25 points and has made a new contract low of 1802.50, which takes out the January 20 print of 1804.25.
Our experience informs us when a market continues to trade at the very low end of its trading range for an extended period of time (flatlining), without much of a rally, there is a likelihood of a sharp break to the downside and the E-mini is flatlining. If clients have not done so already, long puts in the March S&P 500 E-mini should be in your arsenal. There is heightened concerns of a European banking crisis and banking CDS’ have blown out to the upside.
We think it would take a major dovish announcement by the Federal Reserve to send the market sharply higher. On December 11, OIA announced that the March S&P 500 E-mini generated a short-term sell signal and an intermediate term sell signal on January 5. Subscribers to OIA-Direct, please call with any question.