WTI crude: On April 24, June and July 2017 WTI crude oil generated short term sell signals, which reversed the April 5 short term buy signals. Both contracts remain on intermediate term sell signals
June WTI lost 39 cents on surprisingly light volume of 833,509 contracts. Volume was the weakest since April 17 when the June contract lost 53 cents on volume of 730,431 contracts and total open interest declined by 39,343. On April 24, total open interest declined just a mere 51 contracts, which is unbelievable considering the magnitude of the decline and the fact that crude oil prices reached their lowest level since the March 29 print of $48.91.
Remarkably, during the past two days the June contract lost $1.48, yet total open interest increased only 1,871 contracts. This tells us that would be market participants are reluctant to add/initiate bearish positions even though crude is at one month lows. The May contract lost 2,648 of open interest while the June contract gained 1,161.
The moving average setup is bearish with the 20 day moving average standing at 51.46, 50 day: 51.79, 100 day 53.43 in the 200 day coming in at 51.68. It looks increasingly likely that 50 day moving average for the June contract will cross below the 200 day moving average in the not too distant future.
Now that crude oil is on a short term sell signal, the market should have a rally that last from 1-3 days and this would be the opportune time to initiate bearish positions. Wait for the rally.
Heating oil: On April 24, June and July 2017 New York heating oil generated short term sell signals, which reversed the short term buy signals of April 3. Both contracts remain on intermediate term sell signals.
Gasoline: On April 24, June and July 2017 New York gasoline generated short term sell signals, which reversed the March 30 short term buy signals. Both contracts remain on intermediate term sell signals.
Natural gas: June and July 2017 New York natural gas will generate short term sell signals on April 25, but remains on intermediate term buy signals.
June natural gas lost 3.2 cents on volume of 360,297 contracts. Total open interest increased by a sizable 9,414 contracts, which relative to volume is average. The May 2017 and contract lost 8,253 of open interest, which means there were more than enough open interest increases in the forward months to offset the decline in May and increase total open interest to an average number.
As this report is being compiled on April 25, the June contract is trading 1.6 cents lower on the day and has made a low slightly below yesterday’s print of 3.125. As we pointed out in yesterday’s report, with managed money holding a substantial net long position, this group will provide fuel for the downside move.
If you’re inclined short this market, wait for counter trend rally, which should last from 1-3 days. Another thing to keep in mind is that natural gas prices can become extremely volatile if temperatures in the Midwest, South and East coast get unseasonably warm.
Euro: On April 24, the June euro generated short and intermediate term buy signals.
The June euro rallied sharply by 1.62 cents on volume of 259,751 after the results of the French election were known. Remarkably, total open interest declined only 1,979 contracts, a number 35% below average. Yesterday the June contract made a high of 1.0928 and this has been easily taken out in today’s trading with another new high of 1.0978, which takes out the previous three month high of 1.0949 made on March 27.
Looking at the weekly continuation chart, there is no resistance until $1.1317, which was the high made by the December 2016 contract on November 7, 2016. As we pointed out in yesterday’s report, managed money is heavily short the euro and yesterday’s minor open interest decline on a very strong move above the upper Bollinger band confirms this crowd is digging in, which is their usual reaction when they’re on the wrong side of a move.
Obviously, the euro is massively overbought and will have a regression to the mean move, but this may not occur for a couple of days. The world is now in love with European equities and the market is anticipating fund flows to the continent. Although, we think higher prices are in the future, we recommend a stand aside posture. Do not buy the euro at this juncture and do not short it.
EUR/JPY: EUR/JPY generated a short term buy signal on April 24 and will generate an intermediate term buy signal on April 25.
EUR/GBP will NOT generate a short or intermediate term buy signal on April 25.
Yen: The June contract will likely generate a short term sell signal in tomorrow’s trading and today’s key pivot point stands at .9062. For a sell signal to be generated the daily high must be below the pivot point.
June yen lost 46 pips on light volume of 163,986 contracts. Total open interest declined just 500 contracts, or, a number that is dramatically below average. As this report is being compiled on April 25, the June contract is trading sharply lower, down 97 pips and has made a new low for the move of .9018, which is the lowest print since made on .8985 made on April 10.
As we pointed out in the April 18 note on the yen, once leverage funds assumed a net long position, the trade on the long side was doomed. This group of professional money managers usually buys tops and sells bottoms. We are seeing the same phenomenon in corn. These wrong-way-Corrigan’s are an excellent gauge to know when to fade the crowd. Once a sell signal is generated and the yen has had its usual counter trend rally, we think it will be a terrific trade for bears. Until then, stand aside.
From the April 18 note on the June yen:
“As we said in previous notes, once leverage funds assumed a net long position, the move in the yen would be on borrowed time.”
“Although it is a distance away from generating a short term sell signal, we have no doubt this will occur in the not-too-distant future. As a consequence, clients should continue to stand aside and wait for managed money to bulk up their long positions, which will provide selling pressure on the way down.”
Silver: On April 24, July New York silver generated a short term buy signal, but remains on an intermediate term sell signal.
July corn advanced 1.75 cents on volume of 479,056 contracts. Total open interest declined by just 487 contracts. The May contract lost 30,465 of open interest, which means there was nearly enough open interest increases in the forward months to offset the decline in May. Yesterday’s action was mildly positive.
On April 21, July corn generated a short term sell signal, which reversed the April 13 short term buy signal. On April 21, the July contract made a new low for the move of 3.60 3/4, which took out the March 27 print of 3.61 3/4. The March 27 low was slightly above December 23, 2016 print of 3.60.
In summary, it appears likely that the lows have been seen in July corn and based upon today’s action, that a new short term buy signal will be generated shortly.
As this report is being compiled on April 25, the July contract is trading 8.50 cents higher or +2.33% on heavy volume and has made a new high for the move of 3.74 3/4, which is the highest print since 3.74 1/2 made on April 18.
For the July contract to generate a short term buy signal, the low of the day must be above OIA’s key pivot point for April 25 of 3.72 1/2 and the low for trading on April 25 has been 3.62 1/2.
It will be important for total open interest to increase on today’s trading. Once a new buy signal is generated, we recommend that new bullish positions be initiated.
S&P 500 E-mini: On April 24, the June S&P 500 E-mini generated a short term buy signal. The contract currently remains on an intermediate term buy signal.
The June S&P 500 E-mini advanced 22.50 points on lackluster volume of 1,557,463 contracts. Volume was above that of April 20 when the June contract gained 18.25 points on volume of 1,471,287 contracts and total open interest increased by 16,459. However, volume was below that of April 13 when the June contract lost 13.25 points on volume of 1,591,947 contracts and total open interest increased by 27,825.
On April 24, total open interest increased by 18,018 contracts, which relative to volume is approximately 45% below average. Yesterday, the June contract made a high of 2376.75 and this has easily been taken out with another new high of 2387.00 on April 25.
The catalyst for the move was the outcome of the French election and skyrocketing equity prices in Europe caused the US markets to follow Europe’s lead. The June contract is likely to test the continuation all-time high of 2401.00 made on March 1. We have no recommendation.