Copper: May New York copper will generate a short term sell signal on March 7, but remains on an intermediate term buy signal.
May New York copper lost 4.45 cents on volume of 75,127 contracts. Total open interest increased by 664 contracts, which relative to volume is approximately 55% below average, but a total open interest increase on yesterday’s decline is bearish. The COT report released on Friday revealed that managed money liquidated 7,188 of their long positions and added 942 to their short positions. Commercial interests added 184 to their long positions and liquidated 7,518 of their short positions.
As of February 28, the date of the COT tabulation, managed money was long copper by ratio of 3.12:1, down from the previous week of 3.43:1 and the ratio two weeks ago of 4.31:1. China has pared back its rate of growth and this is having a major impact on the copper market. Unfortunately, the copper options market is illiquid and trading futures can be very hazardous. We recommend that clients consider the copper ETF JJC on the short side once copper has had a counter trend rally lasting 1-3 days.
Gold: April New York gold will generate a short term sell signal on March 7, but remains on an intermediate term buy signal. We will provide a report on today’s activity tomorrow.
Silver: May New York silver will generate a short term sell signal on March 7, but remains on an intermediate term buy signal. We will provide a report on today’s activity tomorrow.
The March British pound lost 40 pips on substantial volume of 169,590 contracts. Total open interest exploded higher, up 12,199 contracts, which relative to volume is approximately 185% above average, and this means that new short-sellers were entering British pound futures in heavy numbers and driving prices to new low for the move of 1.2225.
The COT report, which was released on Friday but tabulated on February 28 revealed that leverage funds added 4,080 contracts to their long positions and also added 2,730 to their short positions. As of the February 28 tabulation date, leverage funds were short the pound by ratio of 2.66:1, down from the previous week of 2.99:1 and the ratio two weeks ago of 3.16:1.
As this report is being compiled on March 7, the March contract is trading 36 pips lower and has made a new low for the move of 1.2171, which is the lowest print since 1.2001 made on January 17. This is the contract low and also a multi-decade low. On March 1 when the pound generated short and intermediate term sell signals, the March contract lost number 1.21 cents on volume of 148,993 and total open interest also increased by a massive amount, up 17,773.
In other words, speculators are piling into the short side of the pound at the low-end of the trading range and this makes us nervous. We recommend against bearish positions in futures and options and if you decide to trade the pound, use the ETF FXB instead.
Experience has taught us that when spec short sellers begin to pile in at the low-end of the range based upon a well-known narrative, which in this case is the triggering of Article 50 for Brexit, the market may surprise the short-sellers and do something very different. We recommend a stand aside posture.