Soybeans: November 2016 soybeans will generate a short term buy signal provided the daily low remains above OIA’s key pivot point for August 17 of 9.97 1/2. We have no recommendation.
WTI crude oil:
September WTI crude oil advanced 84 cents on volume of 1,057,967 contracts. Volume was slightly above that of August 15 when the September contract gained $1.25 on volume of 1,035,512 contracts and total open interest increased just 78 contracts. On August 16, total open interest declined by a massive 35,261 contracts, which relative to volume is approximately 25% above average meaning that short-sellers covering positions were powering the market higher and both longs and shorts were liquidating on the way up. The September contract accounted for a loss of 47,307 of open interest and there were hardly any open interest increases in the forward months to offset a substantial portion of the loss in the September contract.
For the past three days, the September contract has gained $ 3.09 while total open interest has declined by a massive 47,514 in this time frame, a major concern now that WTI crude oil is on a short term buy signal. On August 15 September and October WTI crude oil generated short term buy signals and typically markets pullback once the buy signal is generated. Instead, crude oil has continued to move higher and the problem is that total open interest has not been increasing during the past three days of the rally, which makes the entire move suspect.
At this juncture, clients should not entertain bullish positions even after the market pulls back, because the short term buy signal is suspect due to the poor open interest action. As this report is being compiled on August 17 after the release of the EIA storage report, the September contract is trading 21 cents lower after making a high of $46.79, which is fractionally above yesterday’s print of 46.73. Stand aside.
The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2.5 million barrels from the previous week. At 521.1 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories decreased by 2.7 million barrels last week, but are well above the upper limit of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories increased by 1.9 million barrels last week and are near the upper limit of the average range for this time of year. Propane/propylene inventories rose 1.8 million barrels last week and are at the upper limit of the average range. Total commercial petroleum inventories increased by 1.3 million barrels last week.
The September dollar index lost 83 points on volume of 30,895 contracts. Total open interest increased by massive 2,621 contracts, which relative the volume is approximately 225% above average meaning aggressive new short-sellers were entering the market in large numbers and driving prices to a new low for the move of 94.800, which is the lowest print since 93.730 made on June 24.
Yesterday’s open interest increase confirms the bearish set up for the dollar index and according to the most recent COT report leverage funds are short the dollar index by ratio of 2. 13:1, which is up from the previous week of 1.84:1 and 1.98:1 the ratio of two weeks ago. As this report is being compiled on August 17 the September dollar index is trading nearly unchanged on the day. We have no recommendation.
December gold advanced $9.40 on volume of 235,250 contracts. Total open interest declined by 7,819 contracts, which relative to volume is approximately 20% above average meaning liquidation by longs and shorts was occurring as prices advanced. It should be noted that both gold and silver have early closes and this does not reflect the price at the end of the session. The December contract accounted for a loss of 7,000 contracts of open interest. As this report is being compiled on August 17 the December contract is trading $7.40 lower on the day on low volume. As we said yesterday, we think clients should begin to position themselves on the bullish side of gold and though the December contract has not made a low above our pivot point (1355.00), we think this is just a matter of time.