Soybean meal: On March 28, May generated an intermediate term buy signal after generating a short-term buy signal on March 7.
May soybean meal lost $3.20 on volume of 68,832 contracts. Total open interest declined by a massive 5,651 contracts, which relative to volume is approximately 230% above average. The May contract accounted for loss of 3,663 of open interest. As this report is being compiled on March 29, the May contract is trading nearly unchanged on the day. We have no recommendation.
WTI crude oil:
May WTI crude oil lost 7 cents on substantially lower volume of 439,029 contracts. Volume traded on March 28 was the lowest of 2016. On March 28, total open interest increased by 3,391 contracts, which relative to volume is approximately 60% below average, but a total open interest increase on yesterday’s minor price decline is negative. The May contract accounted for a gain of 880 of open interest.
As this report is being compiled on March 29, the May contract is trading 86 cents lower and has made a daily low of 37.91, which is the lowest print since 36.61 made on March 16. At this juncture, it is difficult to determine whether the market has actually turned or whether this is a deeper than normal correction with the market setting itself up for a test of the March 18 high of 42.49. This afternoon the American Petroleum Institute will release its inventory data and tomorrow the EIA will release theirs. This will determine the course of crude oil for the next day or two. We have no recommendation.
June gold lost $1.50 on substantial volume of 237,445 contracts. Total open interest declined by a massive 14,886 contracts, which relative to volume is approximately 140% above average meaning liquidation was heavy on the modest decline. The total open interest decline is healthy. The market made a new low for the move of 1207.70,, which is the lowest print since 1207.60 made on February 23.
As this report is being compiled after the speech by the Federal Reserve Chairman, June gold is trading $15.20 higher and has made a daily high of 1242.00, which is the highest print since 1249.80 made on March 23. On March 24, the June contract generated a short-term sell signal, and remains on an intermediate term buy signal. We continue to advise a stand aside posture until we see more liquidation.
The June dollar index lost 23.3 points on light volume of 10,882 contracts. Total open interest increased just 85 contracts. As this report is being compiled on March 29 after the head of the Federal Reserve, Janet Yellen has given a speech on interest rate policy, the June dollar index is trading sharply lower, down 61.5 points and has made a daily low of 95.320, which is the lowest print since 95.275 made on March 22. The June contract is headed for a test of the March 18 low of 94.605.
We’ve been telling clients for quite some time the dollar is in a bear market despite all the talk in financial press about the strong dollar. The fact is the dollar is weak and has been for many months. Last week, the 50 day moving average of 97.125 crossed below the 150 day average of 97.304 for the cash dollar index (DXY) and the cross beneath the 200 day moving average is just a matter of time. The 200 day moving average stands at 97.096 and once this cross occurs, it will be difficult for the financial press to ignore the dollar bear market any longer.
The June euro advanced 30 pips on light volume of 72,760 contracts. Open interest increased by a healthy 1,776 contracts, which relative to volume is average. As this report is being compiled after the speech by the Federal Reserve chairman, the June euro is trading 72 pips higher and has made a new high for the move of 1.1303, which is the highest print since 1.1313 made on March 21.
The June euro is in a bullish moving average set up with the 50 day moving average standing at 1.1099, 100 day, 1.0989, and the 150 day moving average standing at 1.1092. Shortly, the 50 day moving average will cross above the 200 day moving average of 1.1107 and this will confirm the euro is in a bull market. As we have advised previously, clients should trade the euro from the long side only. There are substantial numbers of short-sellers in the euro, and they will be forced to cover as prices continue to advance.
The June pound advanced 1.00 cent on light volume of 49,636 contracts. Total open interest declined by 413 contracts, which relative to volume is approximately 50% below average, but an open interest decline on yesterday’s strong price advance is negative and confirms that short sellers covering positions were powering the market higher.
As this report is being compiled on March 29 after the speech by the chairman of the Federal Reserve, the June contract is trading sharply higher, up 1.43 cents on much stronger volume than March 28 and the June contract has made a daily high of 1.4397, which is the highest print since 1.4402 made on March 22. Of the main currency futures we follow: euro, yen, pound, Swiss franc, Canadian dollar and Australian dollar, only the Australian dollar is stronger on March 29 up 1.09% compared to the pound +0.98%.
The degree of bearishness in the pound cannot be underestimated and there is no telling how far the rally can carry. As we see it, the rally will blow out many short-sellers except the most hardy of souls and once this is occurred, the pound will resume its downtrend as concern about Brexit begins re-assert itself.
As it turned out, clients were able to liquidate their bearish positions at the bottom of the move per OIA’s recommendation and currently the June contract is trading nearly 3.50 cents above the March 24 low of 1.4059. The pound remains on a short-term buy signal and an intermediate term sell signal. Stand aside.
From the March 24 research note on the pound:
“The COT report released on Friday showed that leverage funds liquidated a substantial 23,021 contracts of their long positions and also liquidated 1,518 of their short positions which left the short ratio at 1.86:1, up from the previous week’s print of 1.33:1, but is down from the substantial short ratio of 2.89:1 made two weeks ago. The current report reflected the partial liquidation of the large long position (38,693), which was initiated during the time frame of the previous week’s report.”
“In summary, professionals have gotten severely whipsawed by the pound and will likely be hesitant to enter new long positions. In the research note of March 23, we recommended that clients move to the sidelines and wait for a spot to re-institute bearish positions. At this juncture, we think it’s premature and want to see more market action before making a recommendation. Keep in mind, the pound remains on a short-term buy signal, and an intermediate term sell signal.”