WTI crude oil:
August WTI crude oil advanced by 39 cents on volume of 1,487,149 contracts. Total open interest increased just 256 contracts. The August contract accounted for a loss of 39,395 of open interest, which means there was barely enough open interest increases to offset the decline in August and increase total open interest. As this report is being compiled on July 7, the August contract is trading down $1.19 on heavy volume. We recommend a stand aside posture and think it is likely the buy signal of July 3 will reverse.
Natural gas: On July 6, August and September 2017 New York natural gas generated short-term sell signals and remain on intermediate-term sell signals.
August natural gas advanced 4.8 cents on volume of 356,920 contracts. Total open interest declined by 1.579 contracts, which relative to volume is approximately 75% below average. The August contract accounted for a loss of 10,227 of open interest. As this report is being compiled on July 7, the August contract is trading 1.2 cents lower on low volume. Although, natural gas may continue to make new seasonal lows during the month of July and possibly into August, we think there will be an opportunity on the long side when stocks draw down in early fall.
The September euro advanced 79 pips on volume of 202,288 contracts. Total open interest increased by 1,735 contracts, which relative to volume is approximately 55% below average. As this report is being compiled on July 7, the September contract is trading slightly lower on the day and has taken out yesterday’s high with another new print of 1.1482. Although the euro is ultimately headed higher, it remains substantially overbought and therefore the risk on the downside does not merit bullish positions at this juncture. Stand aside.
Mexican Peso: On July 6, the September Mexican Peso generated a short term sell signal, but remains on an intermediate term buy signal. No recommendation.
10 year U.S. Treasury Note:
The September 10 year note lost 7.5 points on volume of 1,571,244 contracts. Total open interest declined by 17,296 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on July 7th after the release of the US employment report showed substantial job gains, the September contract is trading 2 points lower, but has not taken out yesterday’s low of 124-255.
On June 28th, the September note generated a short-term sell signal and an intermediate term sell signal on July 3. Unfortunately, the market has not had a rally of any duration, which would have enabled clients to establish bearish positions. At this juncture, we continue to recommend a stand aside posture and encourage clients to wait for the rally.
S&P 500 Index: On July 6, the S&P 500 cash index generated a short term sell signal, but remains on an intermediate term buy signal. The September S&P 500 E-mini has not generated a short term sell as of July 7
S&P 500 E-mini:
On July 6, the September S&P emini lost 19.25 points on relatively low volume of 1,607,785 contracts. Surprisingly, total open interest declined only 3,436 contracts a minor number, which indicates that participants were not panicking on yesterday’s decline. As this report is being compiled on July 7, the e-mini is trading 15.75 points above yesterday’s close.
The earnings season begins next week and if positive could give a bid to the market. However, interest rates are rising and though this may not be an impediment short term due to the favorable impact on bank stocks, if it continues, rallies could be stymied. The rally could continue for another day, two at best, unless the sell signal reverses. Wait for a further rally before initiating bearish positions.
The September Nasdaq 100 lost 54.75 points on volume of 371,059 contracts. Total open interest increased only 2,573 contracts. Similar to S&P 500 futures, the minor increase of open interest indicates that market participants and would be market participants are not panicking or becoming very bearish. This worries us. There is a tremendous amount of complacency in the market and many of the big cap Nasdaq stocks are on short term sell signals.
For example, Apple, Google, Facebook Amazon Netflix and Microsoft remain on short term sell signals as of July 7. On June 12, OIA announced that the Nasdaq-100 cash index generated a short-term sell signal and on June 16th, the September Nasdaq-100 generated a short-term sell signal. Both indices have not generated intermediate-term sell signals as of July 7. We have no recommendation for the NASDAQ 100.