WTI crude oil:
August WTI crude oil advanced 64 cents on volume of 1,667,653 contract. Total open interest by 18,279 contracts. The August contract lost 60,720 of open interest, which means there were not enough open interest increases in the forward months to offset the decline in the August contract.
As this report is being compiled on July 12 after the release of the EIA storage report, the August contract is trading 63 cents higher and has made a daily high of 46.38, which is the highest print since 46.53 made on July 6. On July 3, OIA announced that August WTI generated a short term buy signal. Ever since then, we have recommended a stand aside posture.
The Energy Information administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 7.6 million barrels from the previous week. At 495.4 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Total motor gasoline inventories decreased by 1.6 million barrels last week, but are in the upper half of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories increased by 3.1 million barrels last week and are above the upper limit of the average range for this time of year. Propane/propylene inventories increased by 1.7 million barrels last week but are in the lower half of the average range. Total commercial petroleum inventories decreased by 3.9 million barrels last week
August natural gas advanced by a strong 11.8 cents on elevated volume of 525,585 contracts., Remarkably, total open interest did not increase and in fact declined by 1,031 contracts. The August contract accounted for a loss of 30,752, which means there were not enough open interest increases in the forward months to offset the decline in August.
This follows the dismal performance on July 10 when the August contract gained 6.5 cents and total open interest declined by 11,397. In summary, during the past two days, August natural gas has gained 18.3 cents and yet total open interest has declined by 12,428. This indicates that short-sellers were powering the market higher, not new buying.
Yesterday we said that the August contract was getting close to generating a short term buy signal. However, on July 12, the August contract is trading 7.1 cents lower and is far from generating a short term buy signal. As a matter of fact, the August contract could not surpass yesterday’s high of 3.053. Stand aside.
The September euro advanced 73 pips on volume of 192,016 contracts. Though volume was unimpressive, total open interest increased by an astounding 8,973 contracts, which relative to volume is approximately 75% above average.
Yesterday, the September contract made a high of 1.1521, which is the highest print on the weekly continuation chart since 1.1631 made during the week of May 2, 2016.
As this report is being compiled on July 12, the euro is pulling back, but has made a new high of 1.1530. Although, the euro is headed higher, we strongly recommend against bullish positions at current levels. The market is well overdue for a setback and this could come at any time. There will be an opportunity to get on board the bullish bandwagon, but for now stand aside.
Nasdaq 100 Index:
On July 12 the NASDAQ 100 cash index will generate a short term buy signal, which reverses the June 12 short term sell signal. Additionally, the technology ETF XLK also will generate a short term buy signal. The Nasdaq 100 and XLK remain on intermediate term buy signals.
September NASDAQ 100 futures will not generate a short term buy signal on July 12, however, we expect this to occur during the next day or two. In summary, it appears market momentum is accelerating and that higher prices are ahead at least in the very short term.
The short term sell signal of July 6 in SPX will not be reversed on July 12, but this is likely during the next couple of days. September E-mini futures never generated a short term sell.