WTI crude oil:
January WTI crude oil gained 38 cents on volume of 1,143,032 contracts. Total open interest declined by 16,551 contracts, which relative to volume is approximately 40% below average, but a total open interest decline on Friday’s modest advance is slightly negative. The December contract accounted for a loss of 48,385 of open interest.
The COT report released on Friday showed that managed money added 15,593 to their long positions and also added 22,592 to their short positions. Commercial interests added 6,046 to their long positions and also added 26,052 their short positions. As a consequence, managed money was long WTI crude oil by a surprisingly low 1.67:1, which is down from the previous week of 1.81:1 and substantially below the ratio two weeks ago of 3.68:1.
As this report is being compiled on November 21, the January contract is trading sharply higher, up $2.02 or +4.34% on the belief that OPEC will begin to restrict production. While we have no idea whether this will be the case, we continue to recommend a stand aside posture because taking positions based upon what OPEC will or will not do has never been a viable speculative strategy. For the January contract to generate a short term buy signal, the low of the day must be above OIA’s key pivot point of $47.15 and the low thus far on November 21 has been 46.46.
December natural gas advanced 14.00 cents on surprisingly light volume of 349,022 contracts. Total open interest declined by massive 18,813 contracts, which relative to volume is approximately 110% above average meaning liquidation was extremely heavy on Friday’s strong advance. The December contract lost 22,981 of open interest.
The COT report revealed that managed money liquidated 1,009 contracts of their long positions and added 20,932 to their short positions. Commercial interests added 11,324 to their long positions and also added 655 to their short positions. As of the latest report, managed money is long natural gas by a ratio of 1.07:1, down from the previous week of 1.18:1 and the ratio two weeks ago of 1.39:1.
On October 26 January natural gas generated short and intermediate term sell signals, and as this report is being compiled on November 21, the January contract is trading 7.7 cents above Friday’s close or +2.62%. For the January contract to generate a short term buy signal, the low of the day must be above OIA’s he pivot point for November 21 of $3.101. Stand aside.
The December dollar index advanced 33.7 points on heavy volume of 59,400 contracts. Volume exceeded that of November 17 when the December contract gained 50.8 points on volume of 58,167 contracts and total open interest increased by a massive 2,541. On November 18, total open interest increased massively again, this time by 2,659, which relative to volume is approximately 70% above average meaning that aggressive new buyers continue to flood into the dollar index and on Friday drove the index to new contract high of 101.540. The cash dollar index reached the highest level since April 2013.
The COT report revealed that leverage funds liquidated 2,663 of their long positions and also liquidated 6,537 of their short positions. Remarkably, leverage funds are long the dollar index by just 1.29:1, which is up from the previous week of 1.09:1 and the ratio two weeks ago of 1.11:1. This tells us that the dollar index rally has further to go.
By way of comparison consider the Japanese yen: Remarkably, leverage funds are long the yen by a ratio of 1.29:1 even though the December contract is nearing its multi-month low of .8975 made during the week of May 30, 2016. In summary, leverage funds are equally bullish on both the dollar index and yen, which is strange beyond belief. One is in a major bull market-the other in a bear market. On November 11, OIA announced that the December and March dollar indices generated short term buy signals and both contracts were already been on intermediate term buy signals. We have no recommendation.
10 Year Treasury Note:
The December 10 year treasury note lost 16.5 points on strong volume of 2,004,465 contracts. Total open interest increased by a huge 96,914 contracts, which relative to volume is approximately 75% above average and this indicated that large numbers of aggressive short-sellers were entering the treasury note market and driving prices down to a new contract low of 125-100, which is the lowest print since 125-140 made during the week of December 28, 2015.
The COT report released on Friday revealed a surprising shift among leverage funds. According to the report, leverage funds added 86,264 contracts to their long positions and liquidated a massive 118,231 of their short positions. As of the latest report, leverage funds are now LONG the 10 year treasury note by a ratio of 1.24:1, which is a complete reversal from the previous week when they were SHORT by a ratio of 1.16:1 and the ratio two weeks ago when they were short by 1.14:1. It is mystifying why suddenly leverage funds assumed a net long position, but one thing is clear, they are on the wrong side of the market. However, the 10 year is massively over sold and due for a strong counter trend rally. We have no recommendation.