WTI crude oil:
May WTI crude oil lost 29 cents on volume of 1,331,856 contracts. Total open interest declined by 966, essentially an unchanged number. The May contract accounted for a loss of 76,535 contracts and there were not enough open interest increases in the forward months to offset the total decline in the May contract.
We continue to see unimpressive open interest action relative to price advances and declines and this pattern that has been in evidence for the past several trading sessions. As this report is being compiled on April 13, the May contract is trading 16 cents lower and has not taken out yesterday’s high of 53.76, which thus far has been the high for the move.
The performance of gasoline has been unimpressive and we are recommending the liquidation of any bullish positions in gasoline and in the gasoline ETF UGA. The May WTI contract has been unable to generate an intermediate term buy signal, though there have been a number of attempts over the past couple of days. For an intermediate term buy signal to be generated, the low of the day must be above OIA’s key pivot point for April 13 and $53.13. Yesterday, we recommended the liquidation of the December 2018-December 2019 bull spread. Stand aside in the petroleum complex.
Copper: On April 12, May and July NY copper generated intermediate term sell signal and remain on short term sell signals.
May New York copper lost 6.30 cents on heavy volume of 153,297 contracts. Total open interest increased by 3,583 contracts, which relative to volume is approximately 10% below average. A total open interest increase on yesterday’s sharp decline indicates that new short-sellers were entering the market and driving prices to a new low for the move of $2.5345, which is the lowest print since $2.5390 made on January 10, 2017.
The COT report released last Friday revealed that managed money liquidated 2,611 of their long positions and added 3,989 to their short positions. Commercial interests liquidated 2,033 of their long positions and also liquidated 2,379 of their short positions. As of the April 4 tabulation date, managed money was long New York copper by ratio of 2.32:1, down from the previous week of 2.64:1 and the ratio two weeks ago of 2.39:1.
As we pointed out in the April 5 research note, copper was close to generating a short term buy signal, but this never materialized. The May contract traded beyond our pivot (2.6644), but was unable to make a daily low above it and then turned lower and never looked back. Stand aside.
From the April 5 note on NY copper:
“The May contract is getting close to generating a short term buy signal and is already on an intermediate term buy signal. The short term buy signal will occur if the daily low is above OIA’s key pivot point for April 6 of $2.6644. The moving average setup is bullish with the 50 day moving average standing at 2.6766, 100 day, 2.6334, 200 day 2.4133.”
“Copper should be traded from the long side once the short term buy signal is generated. For clients who prefer to trade copper via equities, after copper futures have generated a short term buy signal, the copper ETF JJC may be used for trading purposes.”
10 Year US Treasury Note:
The June U.S. Treasury note closed unchanged on volume of 1,371,647 contracts. Total open interest declined just 2,066 contracts. Yesterday the June contract made a high of 126-000 and pulled back into the close. However, on April 13 the June contract is rocketing higher, up 19 points or +0.47% and has made a new high for the move of 126-080, which is the highest print since 126-050 made on November 18, 2016 on the daily continuation chart for the December 2016 contract.
Although, the June contract had a sharp move higher on April 11, up 18.5 points on volume of 1,485,691 contracts, total open interest increased only 15,109, which is approximately 50% below average. At the very least, this indicates a lack of enthusiasm for the upside by potential market participants. However, with leverage funds remaining net short, this group of speculators will likely power the market higher if the June contract continues to make multi-month highs.
The COT report released last Friday revealed that leverage funds liquid liquidated 8,199 of their long positions and also liquidated 76,933 of their short positions. As of the April 4 tabulation date, leverage funds were short the 10 year note by a ratio of 1.27:1, down from 1.36:1 the previous week and 1.75:1 made two weeks ago. Three weeks ago, the ratio stood at 1.78:1, which indicates that money managers have become substantially less bearish on the 10 year note of late.
On March 22, OIA announced that the June 10 year U.S. Treasury note generated short and intermediate term buy signals. We want to emphasize that clients should not attempt to pick tops in this market (or any market for that matter). However, once sufficient numbers of short-sellers have been blown out, the rally will likely stall, which will set the stage for the downward cycle.
Canadian dollar: the June Canadian dollar will generate a short term buy signal on April 13 provided the daily low remains above OIA’s key pivot point for April 13 of 75.19. The low thus far in trading has been 75.16.
S&P 500 E-mini:
The June S&P 500 E-mini lost 10.25 points on April 12 on volume of 1,538,599 contracts. Total open interest declined by 9,534 contracts, which relative to volume is approximately 65% below average.
The COT report released last Friday revealed that leverage funds added 326 contracts to their long positions and liquidated 6,049 of their short positions. This reflects activity for the large S&P 500 futures contract (250 x). As of the April 4 tabulation date, leverage funds were short by a ratio of 1.52:1, up from the previous week of 1.47:1, but down substantially from the ratio two weeks ago of 2.69:1.
As this report is being compiled on April 13, the June contract is trading 7.00 points lower and has made a daily low of 2330.25, which is the lowest print since 2317.75 made on March 27.
On March 22, OIA announced that the June S&P 500 E-mini contract generated a short term sell signal. The June contract has been trading in a sideways pattern since the sell signal and has been unable to generate an intermediate term sell signal, which is very positive.
Also, The NASDAQ 100 remains on a short term buy signal and is the only major index to maintain the short term buy. If the NASDAQ 100 were to generate a short term sell signal, it would be a major negative for the major US stock indices. The sell would occur if the daily high is below OIA’s key pivot point for April 13 of 5378.94.
Our view is that the S&P 500 E-mini is in a normal pullback mode, however, if there are increased political tensions, for example a major confrontation with North Korea, we think markets would take a sharp dive, although we think they will recover if the confrontation is brief.
The 50 day moving average for the June E-mini stands at 2346.86 and the daily year to date moving average is 2322.67. Currently, the June contract is trading 10 points above its daily year to date moving average. We have no recommendation.