WTI crude oil:
July WTI crude oil lost 26 cents on volume of 1,197,006 contracts. Total open interest increased by 16,004 contracts, which relative to volume is approximately 45% below average. During the past two sessions, the July contract lost 96 cents while total open interest has increased each day for a total of 34,630 contracts. This means that short-sellers have been driving prices lower, not long liquidation. The July contract accounted for a loss of 9,896 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in July and increase total open interest.
As this report is being compiled on June 6, the July contract is having a small rally, up 54 cents on the day. On June 2, OIA announced that July of WTI generated a short term sell signal and remains on an intermediate term sell signal. We recommend a stand aside posture.
10 Year U.S. Treasury note:
The September 10 year note lost 5.5 points on light volume of 814,696 contracts. Total open interest declined by 8,830 contracts, which relative to volume is approximately 40% below average. As this report is being compiled on June 6, the September contract is rocketing to a new high for the move of 126-290, which is the highest print since 127-070 made the week of November 14, 2016 by the December 2016 contract.
It is remarkable that yields continue to decline even though equity markets are trading close to their all-time high and the likelihood of a rate hike in the June meeting of the FOMC. On March 22, OIA announced that the June note generated short and intermediate term buy signals. We recommend a stand aside posture until the 10 year note generates a short term sell signal. The trend is up for now and clients should not attempt to pick a top in this market. Longer term we see lower prices.
From the June 2 note on the 10 year:
“The daily moving averages on the continuation chart show a short term bullish set up with the 20 day standing at 125-296, 50 day, 125-182, 100 day, 125-005 and the 200 day standing at 126-226. For the daily moving averages to move into a solid bullish set up, the 20 and 50 day moving averages must be above the 200 day moving average.”
“The weekly moving averages on the continuation chart reveal a bearish set up. The 10 week stands at 125-296, 20 week, 120-068, 50 week, 127-163 and the 100 week of 128-050. The 10 and 20 month moving averages on the continuation chart also reflect a bearish set up with the 10-month standing at 126-171 and the 20 month 128-078. Unless the economy weakens considerably, we do not envision the weekly and monthly moving averages moving into bullish setups.”
The June Mexican peso gained 106 pips on volume of 62,480 contracts. Total open interest declined by 2,523 contracts which relative to volume is approximately 55% above average. Yesterday the Mexican peso made a new high for the move of .05445 and this has been taken out with another new print of .05472. This is the highest level on the continuation chart since .05486 made the week of November 7, 2016.
The COT report released on Friday revealed that leverage funds added 12,543 contracts to their long positions and liquidated 9,352 of their short positions. As of the May 30 tabulation date, leverage funds are long the peso by a ratio of 2.39:1, up sharply from the previous week of 1.76:1, but down slightly from the ratio two weeks ago of 2.56:1.
The daily moving averages are in a solid bullish set up and for the most part so are the weekly averages. For example, the 10 week stands at .05320, 20 week .05176, 50 week .05130 and the 100 week of .05439. However, the longer-term 10 and 20 month moving averages continue to be in a bearish set up with the 10 month moving average of .05104 and the 20 month of .05350.
On January 30, 2017, OIA announced that the March Mexican peso generated a short term buy signal and and intermediate term buy signal on February 9. The trend is up, which means that no one should attempt to pick the top in this market. The June contract is substantially overbought relative to its 10 week moving average. As a consequence we recommend against entering new bullish positions at current levels.
The June British pound advanced 28 pips on volume of 77,586 contracts. Total open interest increased by 684 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on June 6, the June contract is trading 23 pips lower on the day and has made a daily high of 1.2955, which is above yesterday’s print of 1.2946.
The COT report released on Friday revealed that leverage funds liquidated 4,396 of their long positions and added 1,218 to their short positions. As of the May 30 tabulation date, leverage funds were short the pound by a ratio of 1.09:1, a REVERSAL from the previous week when they were long by ratio of 1.04:1. Two weeks ago, leverage funds were short by a ratio of 1.09:1.
The daily moving averages on the continuation chart are in a solid bullish set up. The 20 day stands at 1.2923, 50 day of 1.2779, 100 day 1.2598, 200 day of 1.2616. The weekly moving averages are a bit mixed with the 10 week standing at 1.2813, 20 week of 1.2623, 50 week 1.2688 and 100 week 1.3749. The long term moving averages are in a distinct bearish set up with the 10 month moving average standing at 1.2640 and the 20 month that 1.3435.
We strongly recommend a stand aside posture until after Thursday’s vote. On May 30, the June and September pound generated short term sell signals. Both contracts remain on intermediate term buy signals. Stand aside.