Chicago wheat: On April 8, May and July Chicago wheat generated short and intermediate term sell signals.
Copper: On April 8, May and July New York copper generated intermediate term sell signals after generating short-term sell signals on April 1.
WTI crude oil:
May WTI crude oil advanced $2.46 on record setting volume of 1,613,844 contracts. Surprisingly, total open interest increased only 166 contracts, and the May contract lost 76,215 of open interest, which means there were barely enough open interest increases in the forward months to offset the decline in May and increase total open interest. Total open interest action relative to the strong price advance was a disappointment, but despite this, on April 11, the May contract is trading 78 cents above yesterday’s close and has made a new high for the move of $40.75, which is the highest print since 41.34 made on March 23.
On April 4, May and June WTI crude oil generated short-term sell signals, and for the sell signal in the May contract to reverse, the low of the day must be above OIA’s key pivot point for April 11 of $39.55 and the low for trading on April 11 has been 39.25.
The action in the products was mixed with heating oil gaining 7.47 cents on volume of 209,156 contracts and total open interest declined by 4,382. For gasoline, the May contract gained 8.25 cents on volume of 202,373 contracts and total open interest increased by 2,822 contracts, which relative to volume is approximately 40% below average. In summary, when examining the price and open interest action for crude oil, heating oil and gasoline, total open interest action was disappointing for the bulls.
Brent crude oil: June and July Brent crude oil will generate a short-term buy signal on April 11 provided the daily low in the June Brent crude oil contract remains above OIA’s key pivot point for April 11 of $40.93. Today’s buy signal reverses the April 4 short-term sell signal and the June and July contracts remain on intermediate term buy signals.
June Brent crude oil advanced $2.51 on volume of 983,910 contracts. Total open interest increased by a substantial 28,458 contracts, which relative to volume is approximately 5% above average. The June contract accounted for a loss of 13,650 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in June and increase total open interest substantially. Obviously, the performance in Brent crude oil was far superior to that of WTI from an open interest point of view.
As this report is being compiled on the June contract is trading 75 cents above Friday’s close and has made a new high for the move of 43.06 and this is the high print for the June contract since its contract low of 27.11 made January 20.The new short-term buy signal in Brent crude increases the likelihood that WTI will generate a short-term buy signal, possibly in tomorrow’s trading. We have no recommendation.
Natural gas: OIA recommends that clients liquidate the short put or long call option positions recommended on March 30.
May natural gas lost 2.8 cents on volume of 360,055 contracts. Total open interest declined by 5,462 contracts, which relative to volume is approximately 40% below average. The May contract lost 34,258 of open interest. As this report is being compiled on April 11, the May contract is trading 7.4 cents below Friday’s close, and natural gas does not have the momentum to make a healthy advance at this juncture. Therefore, we are recommending the liquidation of the light bullish position recommended in late March.
The June British pound advanced 60 pips on volume of 78,747 contracts. Total open interest declined by 1,127 contracts, which relative to volume is approximately 40% below average. As this report is being compiled on April 11, the June contract is trading 1.23 cents above Friday’s close and has made a daily high of 1.4289, which is the highest print since 1.4281 made on April 5.
The pound is trading in a choppy fashion, and although we think it is ultimately headed lower to test the contract low of 1.3835, it may have sharp sporadic rallies, which serve to blow out the very large contingent of short positions. On April 6 the June pound generated a short-term sell signal and it remains on an intermediate term sell signal. At this juncture, we recommend a stand aside posture.
AUD/CAD: On April 8, AUD/CAD generated a short-term sell signal, and remains on an intermediate term sell signal.
The June Canadian dollar advanced by a strong 96 pips on volume of 79,791 contracts. Total open interest increased by 873 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on April 11, the June contract is trading a higher by 43 pips and has made a daily high of 77.58, which is the highest print since 77.98 made on March 31.
Remarkably, according to the COT report released on Friday, leverage funds remain short the Canadian dollar by a ratio of 1.28:1, which is down from the previous week of 1.54:1 and the ratio two weeks ago of 2.12:1. Our position has been that the Canadian dollar will top only after leverage funds assume a net long position. The “wrong-way, Corrigan’s” of the futures markets are a reliable predictor of market tops and bottoms.
The June Australian dollar advanced 49 pips on volume of 80,346 contracts. Total open interest increased by 1,326 contracts, which relative to volume is approximately 35% below average. Note that the total open interest increase in the Canadian dollar was substantially below the Australian dollar even though the Canadian dollar advanced by almost twice the amount of the Australian dollar on volume that was approximately the same.
According to Friday’s COT report, leverage funds are long the Australian dollar by ratio 3.89:1, which is up substantially from the previous week of 2.56:1 and the ratio two weeks ago of 2.29:1. It is ironic that AUD/CAD cross generated a short-term sell signal on April 8. In other words, leverage funds are substantially long the weaker currency (aussie) and short the stronger (loonie).