WTI crude oil:
April WTI crude oil gained 3 cents on volume of 936,412 contracts. Total open interest declined by 33,494,which relative to volume is approximately 20% above average. The March contract accounted for a loss of 48,578 of open interest. The COT report, which was released on Friday showed that managed money added 12,839 contracts to their long positions and liquidated 18,670 of their short positions. Commercial interests added 30,858 to their long positions and also added 45,864 two their short positions. As a result, managed money was long WTI crude oil as of February 14 by a ratio of 8.82:1, up sharply from the previous week of 6.20:1 and above the previous high ratio of 8.00:1 made two weeks ago.
As this report is being compiled on February 21 the April contract is trading 86 cents above yesterday’s close on fairly heavy volume and has made a daily high of 55.03 and a daily low of 53.92, which is below OIA’s pivot point for the continuation of the rally. For the rally to continue, the April contract must make a daily low ABOVE the pivot point for February 21 of $54.29. Until this occurs, we recommend a stand aside posture, but especially because managed money is heavily long crude oil.
The crude oil volatility index, ticker symbol OVX made a new 52 week low of 24.88 on Friday and nearly one year earlier on February 24, 2016, the oil volatility index made its 52 week high at 69.70. This means that options are extremely cheap and also indicates that oil market participants are not expecting major move up or down in the immediate future.
The March euro lost 70 pips on volume of 159,957 contracts. Total open interest increased just 136 contracts. The COT report released on Friday showed that leverage funds added 23 contracts to their long positions and also added 3,477 to their short positions. As a result, as of February 14 leverage funds were short the euro by ratio of 3.12:1, up from the previous week of 3.04:1 and the ratio two weeks ago of 2.85:1.
As this report is being compiled on February 21, the euro is trading sharply lower, down 64 pips and has made a daily low of 1.0533, which is the lowest print since 1.0531 made on February 15. This is the lowest level for the euro in the March contract since 1.0480 made on January 11.
On February 13, OIA announced that the March and June 2017 euro generated short term sell signals and at the time were already on intermediate term sell signals. We believe the euro is headed to parity with the dollar.
The March dollar index lost 52.1 points on volume of 27,675 contracts. Total open interest declined by 1,165 contracts, which relative to volume is approximately 65% above average meaning liquidation was extremely heavy on Friday’s decline. The COT report revealed that leverage funds liquidated 394 contracts of their long positions and also liquidated 475 of their short positions. As a result, leverage funds were long the dollar index as of February 14 by a ratio of 4.94:1, up from the previous week of 4.64:1 as substantial increase from the ratio two weeks ago of 2.91:1.
As this report is being compiled on February 21, the dollar index has reversed course and is trading 49 points higher on the day. On February 15, OIA announced that the March and June 2017 dollar index generated short term buy signals, however both contracts remain on intermediate term sell signals. We have no recommendation.