WTI crude oil:
April WTI crude oil lost $1.22 on volume of 1,172,059 contracts. Total open interest increased by 22,832 contracts, which relative to volume is approximately 20% below average. The April contract gained 13,145 of open interest. As this report is being compiled on March 3, the April contract is trading 53 cents higher after making a daily low of 52.55, which is 1 cent above yesterday’s low.
For a short term sell signal to be generated, the high of the day must the below OIA’s key pivot point for March 3 of 53.28 and the high has been 53.33, therefore a short term sell signal will not be generated on March 3. We continue to recommend a stand aside posture because we see no compelling reason to be involved in crude oil.
Dollar index: On March 2, the March and June dollar index generated intermediate term buy signals after generating short term buy signals on February 15.
The March dollar index advanced 42.4 points on volume of 32,433 contracts. Total open interest exploded higher, up 2,026 contracts, which relative to volume is approximately 150% above average and this indicates that new buyers continue to move very strongly into the dollar index while sending it to a new high for the move of 102.270, which is the highest print since 102.960 made on January 11.
The major components of the dollar index are on short term sell signals and these should support a higher dollar index. Additionally, the 10 year treasury note is on short and intermediate term sell signals, which will further support higher dollar index prices through higher yields on the 10 year note. On February 8, we recommended the initiation of long positions in the dollar index ETF UUP and to add to the position per our February 15 report. Continue to hold these positions and if initiated when recommended ,move protective sell stops to break even.
Yen: The March and June yen will generate short term sell signals on March 3, but remain on intermediate term buy signals.
The March Japanese yen lost 64 pips on volume of 149,001 contracts. Total open interest increased by massive 9,106 contracts, which relative to volume is approximately 140% above average and this indicates that new short-sellers were entering the market in very large numbers and driving prices lower (.8727).
The COT report released a week ago revealed that leverage funds added 3,449 to their long positions and liquidated 709 contracts of their short positions. Still, leverage funds are short the yen by ratio of 2.05:1, though this was down the previous week of 2.39:1 and the ratio two weeks ago of 2.38:1. We are reluctant to recommend bearish positions once a counter trend rally occurs because the equity markets could go into a corrective mode and this has the tendency to give a bid to the yen.
Australian dollar: The March and June Australian dollar will generate short term sell signals on March 3, but remain on intermediate term buy signals.
Gold: April gold will not generate a short term sell signal on March 3 because it is trading above OIA’s key pivot point for March 3 of $1229.10.
April gold lost $17.10 on strong volume of 299,871 contracts. Total open interest increased by 3,315 contracts, which relative to volume is approximately 50% below average, but yesterday’s open interest increase indicates that new short-sellers were driving prices lower, not liquidation, which would be expected considering the magnitude of the decline. As this report is being compiled on March 3, the April contract is trading 4.90 lower and has made a new low for the move of 1223.00, which is the lowest print since 1217.50 February 15.
As we pointed out in previous research notes on gold, the moving average setup continues to be bearish. However, it appears that the market is doing the necessary work at the lower end of its two week trading range of weeks that could signify a significant bottom is in place. Eventually, this will set the stage for a move substantially higher. We continue to be cautious bulls, but cannot at this juncture recommend bullish positions.
New York silver: May New York silver will not generate a short term sell signal on March 3 because it has traded above OIA’s key pivot point for March 3 of 17.845.
10 Year US Treasury Note: On March 2, the June 10 year treasury note generated an intermediate term buy signal after generating a short term buy signal on March 1.
The June note lost 7 points on volume of 1,424,503 contracts. Total open interest increased by 13,932 contracts, which relative to volume is approximately 50% below average. During the past week, the odds of an interest rate increase has shifted dramatically upwards and this has been pressuring the 10 year note. At this juncture, we have no recommendation, but clients should expect a sharp counter trend rally any day now.