WTI crude oil:
August WTI crude oil lost 92 cents on volume of 1,533,507 contracts. Total open interest increased only 9,928 contracts, which relative to volume is approximately 60% below average. The July contract accounted for a loss of 20,049 of open interest. As this report is being compiled on June 21, the August contract is trading 29 cents lower but has not taken out yesterday’s low for the move of $42.94, which is the lowest print since 42.20 made the week of November 14, 2016.
Since generating a short term sell signal on June 2, total open interest increases on price declines have been rare. In our view, this indicates reluctance on the part of would be market participants to become overly bearish at the low-end of the trading range. All this means is that prices have further to go on the downside and the first hint of a bottom may be when total open interest begins to increase massively on further market declines. Stand aside.
The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2.5 million barrels from the previous week. At 509.1 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 0.6 million barrels last week, but are above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories increased by 1.1 million barrels last week and are above the upper limit of the average range for this time of year. Propane/propylene inventories increased by 1.8 million barrels last week but are in the lower half of the average range. Total commercial petroleum inventories decreased by 1.9 million barrels last week.
Corn: September 2017 corn will generate a short term sell signal on June 21, but remains on an intermediate term buy signal. Stand aside.
Dollar index: On June 20, the September dollar index generated a short term buy signal, but remains on an intermediate term sell signal. Stand aside.
Euro: On June 20, the September 2017 euro generated a short term sell signal, and remains on an intermediate term buy signal.
The September euro lost 20 pips on volume of 153,860 contracts. Total open interest increased by 5,184 contracts, which relative to volume is approximately 25% above average. As this report is being compiled on June 21, the September contract is trading nearly unchanged on the day on low volume and has not taken out yesterday’s low for the move of 1.1173.
Since topping at nearly 1.1300, the decline from the high has been orderly and on low volume. As we have pointed out in previous notes, we want the September contract to trade as close as possible to the 50 day moving average (1.1029), which will likely increase bearish bets by managed money, but is a reasonable entry level for bullish positions. For now stand aside.
Yen: On June 20, the September 2017 yen generated an intermediate term sell signal after generating a short term sell signal on June 16.
The September Japanese yen gained 11 pips on light volume of 121,476 contracts. Total open interest increased by 685 contracts, which relative to volume is approximately 70% below average. Yesterday, the September contract made a low of .8981 and this has not been taken out on June 21. We recommend a stand aside posture.
Gold: On June 20, August 2017 New York gold generated an intermediate term sell signal after generating a short term sell signal on June 15.
August gold lost $3.20 on volume of 201,971 contracts. Total open interest increased by 3,226 contracts, which relative to volume is approximately 40% below average. The total open interest increase on yesterday’s decline indicates that market participants are getting increasingly bearish.
As this report is being compiled on June 21, the August contract is trading $2.60 above yesterday’s close and has made a daily high of 1248.80, which is below yesterday’s of 1249.40 and a new low for the move of 1241.70 on June 21, takes out yesterday’s print of 1242.40.
We like gold longer-term, but the market is loaded with speculative longs. Once they substantially reduce long positions, prices should find support at the 100 week moving average of $1215.00 on the weekly continuation chart. .
From the June 15 note on gold:
“As the June 6 note on gold confirms, our concern at that time when gold was trading near the highs was that the dollar index would generate a short term buy signal due primarily because the euro was overbought and a correction in the euro was likely. Yesterday’s action in gold confirmed that scenario and though the euro and the dollar index will not generate the signals we expected today, we think this is likely next week. Stand aside in gold. Longer-term we think gold is bull market.”
From the June 6 note on gold:
“As we pointed out in previous notes on gold, our concern is that a rally in the dollar is overdue and the euro is substantially overbought. A correction in both could cause gold to fall sharply, although we think this will be temporary.”
“As a consequence, gold could generate a short term sell signal until such time as the dollar rally exhausts itself. Another fly in the ointment is the specter of increasing interest rates, which is negative for gold and precious metals. Also, gold is trading at multi-months highs and this could increase hedging by producers. We recommend a stand aside posture for now.”