WTI crude oil:
March WTI crude oil advanced 17 cents on heavy volume of 1,644,249 contracts. Total open interest declined by 32,813 contracts, which relative to volume is approximately 20% below average. As this report is being compiled on February 9, the March contract is trading 72 cents higher and has made a daily high of 53.21 which is the highest print since 53.24 made on February 7.
A couple of days ago, it appeared as if the March contract was heading for a short term sell signal, but yesterday rallied above our pivot point, which for February 9 is 52.28. The rally will resume if the daily low is above OIA’s he pivot point for February 9 of 53.54. Stand aside.
April gold advanced $3.40 on volume of 233,255 contracts. Total open interest increased by 8,528 contracts, which relative to volume is approximately 25% above average indicating that new buyers continue to flood into gold and drive it to a new high for the move (1246.60.) As this report is being compiled on February 9, the April contract is pulling back a bit, down $5.20 and has not taken out yesterday’s high. On February 9, the dollar index is trading 35 points higher and this is the second time in the past couple of days that the dollar index has been trading higher and gold has been firm.
The fascinating aspect of gold is that the net long position of managed money is relatively low even though gold has rallied approximately $120.00 from the December 15 low of 1124.30. According to the latest COT report managed money was long gold by only 1.99:1, which was up from the previous week of 1.79:1 and the ratio two weeks ago of 1.71:1.
In summary, managed money does not take the rally in gold seriously. This may indicate that the rally has substantially further to go. On January 5, OIA announced that April NY gold generated a short term buy signal and intermediate term buy signal on February 6. If long from lower levels, stay with positions, however the market is overbought and we recommend a stand aside posture regarding new positions.
The March euro is getting close to generating a short term sell signal and this will occur if the daily high is below OIA’s key pivot point for February 9 of 1.0669. The March contract was never able to generate an intermediate term buy signal. We think the dollar index will generate a short term buy signal shortly.
We still like the dollar index ETF UUP on the long side and long positions can be entered today at current levels with a sell stop slightly below the February 2 low for the move of $25.65.