Yen: The September yen contract will generate an intermediate term buy signal on July 31 after generating a short term buy signal on July 21.
We recommend the bullish position in New York gold be liquidated on July 31. Originally, we recommended bullish positions on July 21 and those of you who followed our advice have profits.
However, as this report is being compiled on July 31, the December 2017 New York gold contract is trading $1.40 lower and has made a high of 1277.30, which is only fractionally above Friday’s high of 1277 00.
The problem with today’s action is the dollar index is making new contract lows on July 31 and yet this is not been able to rally gold above the 1277 area. The dollar index has made a low of 92.55, which is the lowest print since the week of May 2, 2016 at 91.880.
Move to the sidelines for now. The point being if gold is unable to rally when the dollar index is making new contract lows, what will be the catalyst for the move higher.
As this report is being compiled on July 31, the September natural gas contract is trading at new lows for the move ($2.792), which is the lowest print since 2.653 made during the week of February 27, 2017. The seasonal low during August 2016 was $2.523 made by the September during the week of August 8, 2016. Stand aside.
From the July 21 note on natural gas:
“In previous notes, we wrote about the likelihood of a test of the early July lows and thought it was highly likely that the seasonal low would be made during the month August. From there, we expect a gradual rise natural gas prices into winter, which is when the biggest draws of natural gas occur.”
From the July 18 note on natural gas:
“We like the long side of natural gas, but it may repeat the pattern of last year when the low was made during the month of August. Unseasonably warm temps will send prices higher. However, if this does not materialize, natural gas prices will likely fall, but even so, clients should not become overly bearish. We see higher prices into fall and winter.”
On Friday, the September British pound advanced by a very strong 75 pips on volume of 87,341 contracts. Total open interest increased by 2,538, which relative to volume is approximately 15% percent above average.
As this report is being July 31, the September is trading 34 pips above Friday’s close and has made a new high for the move 1.3223, which is the highest print since 1.3349 made by the September 2016 contract during the week of September 12, 2016.
Remarkably, the COT report revealed that leverage funds remain short the pound and according to the report leverage funds added 582 contracts to their long positions and a substantial addition of 11,373 to their short positions.
As of the July 25 tabulation date, leverage funds were short the pound by a ratio of 1.36:1, up from the previous week of 1.09:1 and the ratio two weeks ago of 1.24:1. Stand aside.
Dow Jones Transportation Index: On July 28, the Dow Jones Transportation Index generated an intermediate term sell signal after generating a short term sell signal on July 21. This may have negative implications for the market as a whole or is just a correction. We have no recommendation.
The industrial ETFs XLI (cap weight) and RGI (equal weight) generated short term sell signals on July 28. Both remain on intermediate buy signals. No recommendation.