This is being written after the release of the US employment report on Friday, June 2. The employment report was a disappointment, yet the S&P 500 is making an all-time high. On the other hand, the yield on the 10 year to is dropping sharply to 2.14%, which takes it below 2.18%, the low made the week of November 14, 2016.
Additionally the Japanese yen is trading 66 pips above yesterday’s close, though it has not taken out the high made on May 18. There are contradictory movements in a number of key instruments and further adding to cross currents is the likelihood the Federal Reserve raises rates during their meeting in mid June. The dollar is trading sharply lower giving precious metals a bid.
WTI crude oil: July WTI crude oil will generate a short term sell signal on June 2 provided the daily high remains below OIA’s key pivot point for June 2 of $48.73. The July contract remains on an intermediate term sell signal.
July WTI crude oil gained 4 cents on volume of 1,281,862 contracts. Total open interest declined by 9,354 contracts, which relative to volume is approximately 55% below average. The July contract accounted for a loss of 8,820 of open interest. As this report is being compiled June 2, the July contract is trading 45 lower and has made a new low for the move of 46.74, which is the lowest print since 46.40 made on May 10.
The sharply lower dollar index is not helping crude oil prices on June 2. The high for the day has been 48.19, which is substantially below yesterday’s high of 49.17 and is below yesterday’s closing price of 48.36. The market looks weak and as pointed out in yesterday’s note, we see no reason to be involved in the crude oil market at this time.
Heating oil: On June 1, July and August 2017 New York heating oil generated short term sell signals, which reversed the May 16 short term buy signals. Both contracts remain on intermediate term sell signals.
Gasoline: July and August 2017 New York gasoline will generate short term sell signals on June 2, which reverse the May 15 short term buy signals. Both contracts remain on intermediate term sell signals.
Natural gas: July and August 2017 New York natural gas will generate intermediate term sell signals on June 2 after generating short term sell signals on May 30.
July natural gas lost 6.3 cents on heavy volume of 586,827 contracts. Volume increased substantially from May 31 when 504,991 contracts were traded and total open interest increased by 11,800 and the July contract lost 7.4 cents. Additionally, volume was above that of May 30 when the July contract lost 16.5 cents on volume of 493,212 contracts and total open interest increased only 1,742. In summary, volume has been increasing on the decline along with open interest.
On June 1, total open interest increased again, this time by 7,533 contracts, which relative to volume is approximately 55% below average. The July contract gained 11,039 of open interest. As this report is being compiled on June 2, the July contract is trading 1.2 cents lower on the day and has not taken out yesterday’s print of 2.988, the low since 2.986 made on March 23. Although we think natural gas prices are headed lower, it is hazardous to chase the market at current levels. We recommend a stand aside posture.
S&P 500 E-mini:
The June S&P 500 E-mini advanced 18.50 points on volume of 1,463,689 contracts. Remarkably, volume was substantially below that of May 31 when the June contract gained just 0.25 point on volume of 1,745,295 contracts and total open interest declined by 4,937 contracts. Volume was above that of May 25 when the June contract advanced 11.50 points on volume of 1,325,124 and total open interest increased by 16,679.
On June 1, surprisingly, total open interest increased only 850 contracts. The June contract lost only 14,522 of open interest, which means there was barely enough open interest increases in the forward months to offset the decline in June. Yesterday’s volume and open interest stats may indicate that market participants and would be market participants are leery of the advance as it continues to move to all-time highs.
As this report is being compiled on June 2, the June contract has made a new all-time high of 2437.25, which takes out yesterday’s all-time high of 2430.50. Please call or email for specific recommendations.