WTI crude oil:
May WTI crude oil lost 76 cents on light volume of 955,392 contracts. Volume fell below that of March 14 when the May contract lost $1.25 on volume of 971,907 contracts and total open interest declined by 15,412. Volume was the weakest since February 29 when WTI advanced 97 cents on volume of 899,284 contracts and total open interest increased by 13,267.
On March 15, total open interest declined by 25,5770 contracts, which relative to volume is average. The April contract lost 35,488 of open interest. Back to back total open interest declines on two days of losses is positive open interest action. As this report is being compiled after the release of the EIA report, the May contract is rocketing higher up $1.47 or +3.91%. In the products category, heating oil is the star performer gaining 4.82 cents or +4.08% and gasoline continues to lag, up fractionally +0.51%. A robust gasoline market would aid WTI in its move higher.
In our research note of March 13, we said that the May contract should find support in the 38.69-39.41 range and obviously this was too conservative as the May contract made a low in yesterday’s trading of 37.71, almost $1.00 below the pivot point range we projected in the March 13 research note. As we pointed out in yesterday’s report (March 14): “crude is not trading like it’s in a bear market, more like a market undergoing a correction.”
We expect a test of the high for the move of $40.48, made on March 11. In this week’s EIA report, crude oil stocks increased again just as they did in the previous week’s report on March 9. On March 9, WTI advanced $1.79 on heavy volume of 1,430,577 contracts and total open interest declined by 1,024. When markets rally on negative news, it is telling would be participants that bad news has been discounted. On March 3, April and May WTI generated short-term buy signals and intermediate term buy signals on March 10. We have no recommendation.
From the March 14 note:
“Additionally, the crude oil volatility index (OVX) is making new lows on March 15 as crude oil trades lower. Usually, the volatility index increases as prices decline and on March 15 has fallen to a new low for the move of 48.49, which is the lowest print since 48.78 made on January 6. On January 6, the May contract traded in a range of 37.21-39.55, which is close to the current range of 37.21-39.08. This is positive.”
The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.3 million barrels from the previous week. At 523.2 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories decreased by 0.7 million barrels last week, but are well above the upper limit of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories decreased by 1.1 million barrels last week but are above the upper limit of the average range for this time of year. Propane/propylene inventories rose 0.2 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories increased by 1.8 million barrels last week.
April gold lost $14.10 on volume of 211,281 contracts. Total open interest declined by 6624 contracts, which relative to volume is approximately 10% above average meaning liquidation was heavier than usual on yesterday’s decline. This is positive open interest action. As this report is being compiled on March 16, the April contract is trading 1.90 lower and has made a daily low of 1227.00, which is $1.00 above yesterday’s low. We discourage anyone from entering bullish positions. April gold remains on short and intermediate term buy signals.
Euro: On March 15, the June euro generated a short-term buy signal after generating an intermediate term buy signal on March 11.
The June euro advanced 14 pips on volume of 133,029 contracts. Total open interest increased just 84 contracts. As this report is being compiled prior to the Federal Reserve board decision on a potential interest rate hike, the euro is trading 34 pips lower on the day, which is typical after the generation of a buy signal. We have no recommendation.
The June pound lost 1.41 cents on light volume of 73,356 contracts. Total open interest increased by 2,713 contracts, which relative to volume is approximately 25% above average meaning aggressive new short-sellers were entering the market in large numbers and driving prices to a new low for the move of 1.4142, which is the lowest print since 1.4122 made on March 10.
As this report is being compiled on March 16 prior to the Federal Reserve announcement, the June pound is trading 49 pips lower and has made another new low for the move of 1.4058. We are monitoring the market to determine the most opportune time to initiate bearish positions.
S&P 500 E-mini: On March 15, the June S&P 500 E-mini generated an intermediate term buy signal after generating a short-term buy signal on February 18.
The June S&P 500 E-mini lost 2.75 points on heavy volume of 2,834,668 contracts. Total open interest increased by a massive 49,623 contracts, which relative to volume is approximately 25% below average, but a total open interest increase on yesterday’s fractional decline is negative.
This is the most negative price and open interest action that we have seen during the past couple of weeks, and it follows a total open interest increase of 22,869 on March 14 when the June contract lost 1.25 points on volume of 2,532,873. Though the E-mini can continue its advance, we think it will be labored and discussed this in the March 13 research note. As this report is being compiled prior to the Federal Reserve announcement, the June contract is trading 4.50 points lower. We have no recommendation.
AAPL: Apple generated an intermediate term buy signal on March 15 after generating a short term buy signal on March 1. As this report is being compiled on March 16, AAPL has made a new high for the move of $106.08, which is the highest print since 107.03 made December 31, 2015.