Apple: Generally speaking we only comment on action in the major indices, but wanted to call your attention to the short-term buy signal in Apple Computer in yesterday’s trading (March 1). We think the worst is over for Apple at this juncture, and after a pullback of 1-3 days, the stock will begin to trend steadily higher.
Sugar: May New York sugar will generate an intermediate term buy signal on March 2. On February 24, May sugar generated a short term buy signal. We have no recommendation.
Copper: May New York copper will generate an intermediate term buy signal on March 2. On February 4, May copper generated a short-term buy signal. We have no recommendation.
WTI crude oil:
April WTI crude oil advanced 65 cents on healthy volume of 1,069,687 contracts. Volume exceeded that of February 29 when the April contract gained 97 cents on volume of 899,284 and total open interest increased by 13,267. On March 1, total open interest increased again, this time by a sizable 35,235 contracts, which relative to volume is approximately 15% above average meaning aggressive new buyers were entering the market in substantial numbers and driving prices higher (34.76). The April contract gained 8,494 of open interest. Two consecutive total open interest increases accompanying price advances is positive, and indicates that new buying is pushing prices higher.
As this report is being compiled on March 2, the April contract is trading nearly unchanged after making a new high for the move of $35.17, which is the highest print since 36.39 made on January 6. Although May WTI has come close to generating a short-term buy signal, it has not had the underlying strength to make a daily low above the pivot point. Gasoline has been a major drag on WTI and thus far has been unable to generate a short-term buy signal even as gasoline is entering its traditional period of seasonal strength. Until gasoline begins to show strength, we think it’s going to be difficult for WTI to begin a robust advance. For a short term buy signal to occur, the daily low must be above OIA’s key pivot point for March 2 of $33.62 and the low thus far in trading has been 33.55. We have no recommendation.
Brent crude oil:
May Brent crude oil closed unchanged on light volume of 712,997 contracts. Total open interest increased by 1,199 and the May contract gained 815 of open interest. As this report is being compiled on March 2, the May contract is trading nearly unchanged on the day after making a daily high of 37.40, which takes out yesterday’s print of 37.25 and is the highest price since 37.52 made on January 28.
On February 26, the May contract generated a short-term buy signal and since then, its performance has been lackluster, but considering the massive build in stocks in today’s EIA report, the market is trading firmly. Today’s daily low of 36.10 is above yesterday’s print of 35.95, which is above the February 29 low of 35.08. In summary, for the past three days, Brent has been experiencing a series of higher highs and higher lows. Since generating the buy signal Brent has not had the usual 1-3 day pullback. Because Brent is on a buy signal, if it is unable to continue its advance, it becomes vulnerable to a reversal of the buy signal. We have no recommendation.
The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 10.4 million barrels from the previous week. At 518.0 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories decreased by 1.5 million barrels last week, but are well above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories increased by 2.9 million barrels last week and are above the upper limit of the average range for this time of year. Propane/propylene inventories fell 3.7 million barrels last week but are well above the upper limit of the average range. Total commercial petroleum inventories increased by 9.9 million barrels last week.
The March dollar index advanced 14.6 points on volume of 20,629 contracts. Total open interest declined by 613 contracts, which relative to volume is approximately 10% above average meaning liquidation was heavier than normal on the modest advance.
Recently, open interest action relative to price advances has been negative and on February 29 when the dollar index had one of its larger moves closing 89.3 points higher, total open interest declined by 1,928 contracts on volume of 28,457. In summary, short covering is powering prices higher rather than new buying. On February 29, the March and June dollar index generated short-term buy signals and have been unable to generate an intermediate term buy signals. We have no recommendation.
Euro: On March 1, the March and June euro generated intermediate term sell signals after generating short-term sell signals on February 29.
The March euro lost 15 pips on volume of 199,402 contracts. Total open interest declined by 2,945 contracts, which relative to volume is approximately 40% below average. As this report is being compiled on March 2, March contract is trading 16 pips lower and has taken out yesterday’s print of 1.0837 with another new low of 1.0828.
Now that the euro is on short and intermediate term sell signals, the market should have a counter trend rally that lasts from 1-3 days and this would be the opportunity to initiate bearish positions if you are so inclined. With the meeting of the ECB right around the corner, we recommend a stand aside posture.
The March Canadian dollar advanced 65 pips on volume of 85,571 contracts. Total open interest increased just 78 contracts. The March contract accounted for loss of 245. Yesterday, the Canadian dollar made a new high for the move of 74.71, which is the highest print since 74.79 made on December 7, 2015.
It will be interesting to see what the COT report reveals when it is released this Friday because the tabulation date for the report was yesterday just as the Canadian made a new high for the move. We maintain that a majority of short-sellers need to be blown out of the Canadian dollar, before it rolls over and new bearish positions be considered. As this report is being compiled on March 2, the March contract is trading 32 pips lower and has not taken out yesterday’s high. We have no recommendation.
10 Year Treasury Note:
The June 10 year treasury note lost 29.5 points on volume of 1,724,884 contracts. Total open interest declined by a massive 111,570 contracts, which relative to volume is approximately 150% above average meaning liquidation was extremely heavy on yesterday’s sharp decline. The March contract, which is due to expire shortly lost 35,166 of open interest and there were additional losses in the forward months.
As this report is being compiled on March 2, the June note is trading 6 points lower and has made a daily high of 129-250, which is above OIA’s key pivot point of 129-174 for the generation of a short-term sell signal. For the sell signal to occur, the high of the day must be below the pivot point, and conceivably this could occur in tomorrow’s trading. We have no recommendation.
S&P 500 E-mini:
The March S&P 500 E-mini advanced by a strong 48.50 points on volume of 2,055,557 contracts. Volume was the strongest since February 24 when the March contract gained 14.25 points on volume of 2,326,578 contracts and total open interest increased by 19,750. On March 1, total open interest increased only 3,545 contracts. The March contract accounted for a loss of 6,686 of open interest and June increased 10,367. Yesterday’s open interest action was a major disappointment as the March contract made a new high for the move of 1978.50, and price action was terrific, but was contradicted by dismal open interest stats.
As this report is being compiled on March 2, the March contract is trading nearly unchanged on the day, but has made a new high for the move of 1984.50, which was made in the evening session on March 1. On February 18, OIA announced that the March S&P 500 E-mini along with the cash Dow Jones Industrial Average, S&P 400 and New York Composite Index generated short-term buy signals. At this juncture, the E-mini is trading above its median price of 1968, and though prices may continue their advance, we think the market will struggle to move substantially higher from here. We recommend a stand aside posture.