WTI crude oil:
March WTI crude oil gained 29 cents on light volume of 809,657 contracts. Total open interest increased just 90 contracts. The March contract accounted for a loss of 16,536 of open interest, which means there were enough open interest increases in the forward months to offset the decline in March, but barely to increase total open interest.
The COT report released on Friday revealed that managed money added 7,422 to their long positions and liquidated 221 contracts of their short positions. Commercial interests added 17,572 to their long positions and also added 24,984 to their short positions. Remarkably, managed money is long WTI crude oil by a stratospheric ratio of 8.00:1, up from the previous week of 7.83:1 and a substantial increase from the ratio two weeks ago of 6.76:1.
On Friday the March contract made a high of $54.22 and this was below the February 2 print of 54.34. As this report is being compiled on February 6, the March contract is trading 57 cents lower on the day and has made a daily high of 54.13 and a low of 53.14. This means the March contract will not resume its uptrend, because it is below OIA’s pivot point or February 6 of $53.60.
The problem with crude oil is that there is a huge surplus of speculative longs in the market, which means if a short term sell signal is generated, there will be substantial fuel to fund the downside move. A short term sell signal will be generated if the daily high for the March contract is below OIA’s key pivot point for February 6 of $52.32. Stand aside.
March natural gas lost 12.4 cents on volume of 467,058 contracts. Total open interest declined by 5,274 contracts, which relative to volume is approximately 45% below average. The March contract accounted for a loss of 4,496 of open interest.
The COT report released on Friday revealed that managed money added 8,772 to their long positions and also added 21,532 their short positions. Commercial interests added 6,187 to their long positions and also added 2,174 to their short positions., Managed money remains long by a sky-high ratio of 1.94:1, though this is down from 2.24:1 the previous week and the ratio two weeks ago of 2.69:1.
As this report is being compiled on February 6, the March contract is trading approximately unchanged on the day but has made a new low for the move of 3.006, which is the lowest print since $2.919 made on November 18. With the very large long position of managed money still overhanging the market, there remains a considerable amount of potential selling pressure.
It is remarkable that natural gas has fallen approximately 90 cents from the high and yet managed money remains substantially net long. On January 4, OIA announced that March natural gas generated short and intermediate term sell signals. Continue to stand aside.
The March Mexican peso advanced 25 pips on volume of 47,624 contracts. Volume exceeded that of February 2 when the March contract gained 57 pips on volume of 44,952 contracts and total open interest increased by massive 2,712. On February 3, total open interest increased by another massive number, this time by 2,599 contracts, which relative to volume is approximately 120% above average and this means that new buyers were flooding into the market and driving prices to a new high for the move of .04906, which is the highest print since .04961 made on December 12.
The COT report revealed that leverage funds liquidated 6,169 of their long positions and also liquidated 4,531 of their short positions. Interestingly, leverage funds are now more short the peso than they were the previous week. The current reading shows that leverage funds are short by 4.15:1, and this is up from the previous week of 3.38:1.
As this report is being compiled on February 6, the March contract is having a normal pullback, down 45 pips. On January 30, OIA announced that the March peso generated a short term buy signal, and continues to be on an intermediate term sell signal. For an intermediate term buy signals to occur, the low of the day must be above OIA’s key pivot point for February 6 of .048470. Continue to hold bullish positions.
Gold: April New York gold will generate an intermediate term buy signal on February 6 after generating a short term buy signal on January 5. We will provide coverage of today’s action in tomorrow’s report.