Silver: On March 27, May New York silver generated a short term buy signal and remains on an intermediate term buy signal.
May New York silver gained 36.00 cents on strong volume of 66,245 contracts. Total open interest exploded higher, up 5,422 contracts, which relative to volume is approximately 210% above average, which means that new buyers were piling into the silver market and driving prices to a new high for the move of $18.150.
As this report is being compiled on March 28, the May contract is trading 9.7 cents higher on the day and has made another new high for the move of $18.255, which is the highest print since 18.480 made on March 2. Silver will continue to move higher provided interest rates and the dollar continue to stay at relatively low levels. We have no recommendation.
The June euro advanced 60 pips on volume of 193,928 contracts. Total open interest increased by 2,807 contracts, which relative to volume is approximately 40% below average. However, a total open interest increase on yesterday’s strong advance indicates that new buyers were moving into the euro and driving it to a new high for the move of 1.0949, which is the highest print since 1.0963 made on December 8, 2016.
The COT report released last Friday showed that leverage funds added 9,293 to their long positions and liquidated 9,538 of their short positions. As of the March 21 tabulation date, leverage funds were short the euro by ratio of 2.30:1, down sharply from the previous week of 3.01:1 and the ratio two weeks ago of 3.49:1. Since the day of the tabulation date, one week ago, we have no doubt that the short ratio has declined further. As this occurs, there’ll be less firepower on the upside and new buyers will be required to continue to move the euro higher.
The French elections are on April 23 and we think it is highly likely that the euro will begin to stall at current levels and likely head lower in advance of the election. On March 13, OIA announced that the June euro generated a short term buy signal and an intermediate term buy signal on March 16. We have no recommendation.
Yesterday, the June British pound gained 67 pips on volume of 96,870 contracts. Total open interest declined by 348 contracts, which relative to volume is approximately 70% below average. However, a total open interest decline on yesterday strong advanced confirms that short-sellers were powering the market higher, not new buying. Yesterday, the June contract made a high of 1.2643, which is the highest print since 1.2744 made on February 2, 2017. Although the move in the euro to the upside has been strong, it has been losing ground against the pound since March 15.
The COT report released on Friday revealed that leverage funds liquidated 6,545 of their long positions and also liquidated 5,731 of their short positions. As of the March 21 tabulation date, leverage funds were short the pound by ratio of 3.14:1, up from the previous week of 2.74:1 and the ratio two weeks ago of 2.62:1.
In summary, speculators continue to be extremely bearish on the pound. We think that the easy short side money is off the table and that the risk is more to the upside than the downside. This does not preclude a move lower, we just think that the downside move has been played out and the market has discounted all the bad news for now. On March 22, OIA announced that the June British pound generated short and intermediate term buy signals. We have no recommendation.
S&P 500 E-mini:
The June S&P 500 E-mini lost 6.25 points on volume of 1,616,473 contracts. Total open interest increased by 12,145 contracts, which relative to volume is approximately 65% below average. Yesterday the June contract made a low of 2317.75, which is the lowest print since 2315.00 made on February 14.
Yesterday, the market sold off sharply in the early going and then recovered throughout the remainder of the session and into the close. The rally continues on March 28 and currently the June contract is trading 13.75 points higher on the day. On March 22, OIA announced that the June S&P 500 E-mini generated a short term sell signal and continues to be on an intermediate term buy signal. For a new short term buy signal to occur, the low of the day must be above OIA’s key pivot point for March 28 of 2372.90.
The COT report revealed that leverage funds liquidated 4,749 of their long positions and also liquidated 16,837 of their short positions. As of the March 21 tabulation date for the S&P 500 large contract (250 x), leverage funds were short by ratio of 2.69:1, down from the previous week of 3.26:1, but up from the ratio two weeks ago of 2.34:1. In our report of March 22, we said this was a light garden-variety shakeout and thus far it appears to be the case. We have no specific recommendation for the E-mini.
From the March 22 research note on the S&P 500 E-mini
“Based upon our calculations, the rally can carry up to the 2365 area before resuming its downtrend. That would be in opportune time to initiate light bearish positions. This is not a new bear market, just a shakeout. However, keep in mind, that the passage or non-passage of the healthcare bill is likely going to have a substantial impact on the market.”