WTI crude oil:
May WTI crude oil gained 7 cents on April 13 on volume of 1,151,926 contracts. Total open interest increased only 5,692, a number that is 75% below average, relative to volume. The May contract lost 43,777 of open interest, which means there were enough open interest increases in the forward months to offset the decline in May and increase total open interest slightly.
The COT report released on Friday revealed that managed money added 10,382 contracts to their long positions and liquidated 38,647 of their short positions. While commercial interests added 11,240 to their long positions and liquidated 2,755 of their short positions. As of the April 11 tabulation date, managed money was long WTI crude oil by ratio of 4.59:1, up sharply from the previous week of 2.97:1 and the ratio two weeks ago of 2.56:1.
Combining the two most recent COT reports from April 4 and April 11, managed money has only increased its long positions by 9,060 contracts while the liquidation of short positions totaled 57,716. This, in conjunction with the abysmal open interest action during the past couple weeks confirms that short-sellers have been powering the market higher, with only sporadic new buying.
As a result we have advised clients to move to the sidelines for crude oil and products. Although, May crude remains on a short term buy signal, it has been unable to generate an intermediate term buy signal.
The June Japanese yen advanced 53 pips on volume of 148,984 contracts. Total open interest increased by 2,901 contracts, which relative to volume is approximately 20% below average, however a total open interest increase for trading on April 13 indicates that new buyers were moving into the yen and sending it to a new high for the move of .9220.
The COT report released on Friday revealed that leverage funds finally assumed a net long position and added 3,936 to their long positions and liquidated 4,484 of their short positions. As of the April 11 tabulation date, leverage funds were long by a ratio of 1.21:1, which is a complete reversal from the previous week when they were short by ratio of 1.05:1 and the ratio two weeks ago when they were short by 1.28:1.
As this report is being compiled on April 17, the June contract is trading 50 pips higher and has made a new high for the move of .9271, which matches the previous high print of .9271 made the week of November 16, 2016. The June contract is headed toward our longer-term pivot point of .9398 and for the rally to move beyond this point, the weekly low must be above the pivot point.
As we stated last week, the rally may be on borrowed time now that short-sellers are capitulating and being carried out on stretchers. This will eliminate a major source of buying power. Once a sufficient number of short-sellers have liquidated, aggressive new buyers will need to step up and make commitments at 6-7 month highs to continue the move higher.
On March 20, OIA announced that the June yen generated a short term buy signal and at the time was already on an intermediate term buy signal. We recommend a stand aside posture.
Dollar index: The June dollar index will not generate a short term sell signal on April 17.
The June dollar index lost 24.8 points on volume of 23,011 contracts. Total open interest declined by a substantial 1,408, which relative to volume is approximately 140% above average meaning liquidation was extremely heavy on Thursday’s decline.
The COT report released on Friday revealed that leverage funds added 1,574 to their long positions and also the added 647 to their short positions. As of the April 11 tabulation date, leverage funds are long the dollar index by ratio of 5.20:1, down from the previous week of 6.29:1, but up from the ratio two weeks ago of 4.64:1.
As this report is being compiled on April 17, the June contract is trading 22 points lower. For the June contract to generate a short term sell signal, which would reverse the short term buy signal of April 10, the high of the day must be below OIA’s key pivot point for April 17 of 99.864. The June contract has not generated an intermediate term buy signal. We have no recommendation.
NASDAQ 100: The June NASDAQ 100 E-mini will not generate a short term sell signal on April 17. For this to occur the daily high must be below OIA’s key pivot point for April 17 of 5375.95.
Corn: On April 13, May and July 2017 corn generated short term buy signals, but remain on intermediate term sell signals.
On April 13, May corn gained 2.00 cents on very heavy volume of 588,191 contracts. Total open interest increased by 18,705 contracts, which relative to volume is approximately 15% above average and this indicates that new buyers were moving into corn and sending it to the highest price (3.73) since March 9 (3.74). The May contract accounted for a loss of 34,404 of open interest.
We have not issued a report on corn in quite a while (aside from notifying clients of signals), because we have not seen trading opportunities, but this is about to change. We think corn has the potential of being a trade of the caliber of the Mexican peso, which we recommended after the peso generated a short term buy signal on January 30, 2017.
Looking at the long term continuation chart for corn, it is apparent that the market has made a long term bottom at the $3.00 level. For example, in 2016 during the month of August, the September 2016 contract made a low of 3.01 and during September 2016 attempted to test this low at 3.01 3/4. The two lows were the lowest prints on the monthly continuation chart since 2.96 3/4, the low made during September 2009. The lowest price for the nearby corn contract on the monthly chart during the past 10 years is $2.90 made at the height of the financial crisis during December 2008.
The two major highs made during the past two years occurred in July 2015 (4.43 1/4 and in June 2016 (4.39 1/4. In summary, the May contract, which is currently trading at 3.66 is approximately 66 cents above the long term low going back several years, and approximately 77 cents below the high made in July 2015 and 73 cents below the June 2016 high.
The moving average setup for May, July and September 2017 corn is bullish and the 50 day moving average for the July contract stands at 3.76 7/8, 100 day: 3.74 1/8 and the 200 day moving average is 3.69 5/8. This solid bullish moving average setup bodes well for future price action and the July contract currently is trading slightly below the 50 and 100 day moving averages.
Additionally, the commitment of traders set up is extremely bullish and in the current report released on Friday revealed that managed money added 8,373 to their long positions and also added 13,857 to their short positions. Commercial interests added 10,294 to their long positions and also added 13,094 to their short positions. As of the April 11 tabulation date, managed money was short corn by ratio of 1.74:1, which is the exact ratio from the previous week, but is slightly below the ratio of two weeks ago of 1.78:1.
As usual, managed money is on the wrong side of the trade and will provide plenty of fuel for the upside move. They continually overstay their positions whether they are bullish or bearish. Managed money is likely to assume a net long position just as the market begins topping.
Though managed money is heavily net short corn they have not increased this position during the past three COT reporting periods. The planting season has gotten off to a slow start and usually there are weather issues during the growing season. Also, there is the distinct possibility of reduced acreage due to low prices during the past couple of years.
In short, we think the worst is behind the corn market price wise and that higher prices are ahead between now and the June time frame. Last year the corn market made a low of 3.68 1/2 on April 25, 2016 and a slightly lower low of 3.67 on May 10 2016. From there, the July 2016 contract continued to rally until it made its high of 4.39 1/4 on June 8.
We think corn is a terrific trade on the long side and recommend the initiation of bullish positions immediately. As is typically the case after the generation of a buy signal, the market is pulling back on April 17 and currently trading 5.00 cents lower on the day and the July contract is trading below the 50 and 100 day moving averages. This is a low risk trade that could yield substantial profits.For recommendations about exit points if the trade disappoints, please call or email.