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Live Cattle: February cattle will generate a short-term sell signal on January 15, which reverses the December 23 short-term buy signal. The February contract remains on an intermediate term sell signal.

February live cattle lost 1.55 cents on volume of 78,300 contracts. Total open interest declined by 862, which relative to volume is approximately 45% below average. As this report is being compiled on January 15, the February contract is trading down the 3.00 cent limit. We have no recommendation.

WTI crude oil: 

February WTI crude oil advanced 72 cents on huge volume of 1,402,155 contracts. Volume exceeded that of January 13 when the February contract gained 4 cents on volume of 1,374,769 contracts and total open interest declined by 28,542. On January 14, total open interest declined by 26,530 contracts, which relative to volume is approximately 25% below average, but an open interest decline on yesterday’s advance confirms the bearish set up for WTI.

As this report is being compiled on January 15, the February contract is trading sharply lower, down $1.73 or -5.54%. As we have said before, stand aside in the petroleum complex and do not attempt to pick a bottom.

Natural gas: February and March natural gas will generate short-term sell signals on January 15, which will reverse the December 29 short-term buy signal. Both contracts remain on intermediate term sell signals.

February natural gas lost 13.00 cents on volume of 391,775 contracts. Total open interest declined by 1,664 contracts, which relative to volume is approximately 75% below average. As this report is being compiled on January 15, the February contract is trading 3.1 cents below yesterday’s close. We have no recommendation.

Dollar index:

The March dollar index advanced 17.7 points on volume of 39,684 contracts. Total open interest increased by 2,622 contracts, which relative to volume is approximately 160% above average. As this report is being compiled on January 15, the March contract is trading lower, down 49 points and has made a daily low of 98.415, which is the lowest print since 98.140 made on January 11. The impetus for the dollar’s decline on January 15 is a sharp rally in the yen and euro. The March dollar index remains on short and intermediate term buy signals. We have no recommendation.

Euro:

The March euro lost 16 pips on volume of 229,282 contracts. Total open interest declined by 2,132 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on January 15, the March contract is trading 95 pips higher and has made a daily high of 1.1000, which is the highest print since 1.1014 made on December 29.

Although, the euro remains on short and intermediate term sell signals, we have cautioned clients about initiating bearish positions due to the likelihood of a broad equity market meltdown and the flight to safety characteristic of the euro. We continue to advise a stand aside posture.

From the January report on the euro:

“As clients know, we have been reluctant to recommend bearish positions due to our concern that an equity market meltdown could boost the euro substantially higher, if only temporarily. We continue to recommend a stand aside posture.”

Yen:

The March yen lost 28 pips on volume of 184,060 contracts. Total open interest declined by 1,433 contracts, which relative to volume is approximately 60% below average. As this report is being compiled on January 15, the March contract is trading sharply higher up 101 pips or + 1.2%. Additionally, the March contract has made a new high for the move of .8592, which easily takes out the previous print of .8573 made on January 11.

On December 21, the March yen generated a short-term buy signal and an intermediate term buy signal on December 29. In yesterday’s report we recommended that clients looking to initiate new positions remain on the sidelines due to the overbought condition of the market and there was a distinct possibility the rally that began yesterday with continue for another day or two. Obviously, we were wrong about this and the yen has resumed its climb. Despite today’s move higher, we still think it is hazardous to initiate new bullish positions at current levels.

From the January 13 report on the yen:

“We think there is more downside left in the yen, especially if the oversold equity market continues to rally. We have advised a stand aside posture for those contemplating new bullish positions and reiterate this stance.”

“In the spot yen market, the 50 day moving average has crossed above the 200 day, however the 100 day moving average remains above the 50 and 200 day moving averages. In the futures market, the March contract 50 day moving average has not crossed above the 200 or 100 day moving averages. However, the fact that the spot yen has made a golden moving average cross is positive. We are looking for a correction to the .8300 level, which should serve to blow-out some of the new speculative longs.”

10 Year Treasury note: On January 14, the March 10 year treasury note generated an intermediate term buy signal after generating a short-term buy signal on January 6.

The March 10 year treasury note lost 7.5 points on relatively heavy volume of 1,551,237 contracts. Total open interest increased by 33,863 contracts, which relative to volume is approximately 20% below average. As this report is being compiled, the March contract is rocketing higher, up 21 points or + 0.51% and has made a new high for the move of 128-290, which easily takes out the previous high for the move of 128-085 made on January 13. We have no recommendation.

S&P 500 E-mini:

The March S&P 500 E-mini advanced 33.00 points on huge volume of 3,053,674 contracts. Total open interest increased just 8,991 contracts, which is substantially below average. In summary, when the March contract has rallied, total open interest increases are tepid at best. For example, on January 12 when the March contract gained 10.75 points on volume of 2,431,563, total open interest increased just 11,685, which indicates that many potential market participants remain on the sidelines when the E-mini rallies.

As this report is being compiled on January 15, the March contract is trading sharply lower, down 52.75 points or -2.78% and has made a new contract low of 1849.25. We examined the S&P 500 cash index and thus far in trading on January 15 the low made during the week of September 28 of 1871.90 has been taken out, as well as the August 24, 2015 low of 1867.01. The next area of support for the S&P 500 cash index is the print of 1821.61 made during the week of October 13, 2014. After this, the low of 1737.92 made during the week of February 3, 2014.

In the December 30 report, we recommended the initiation of short call positions in the January 2016 contract and this trade has been profitable from the start. Today, is the expiration of the January contract, and at this juncture, recommend a stand aside posture. We will be evaluating the market and different strategies that may be initiated at a later date.

From the December 30 report on the S&P 500 E-mini:

“The market looks weak, and this is an opportune time to consider shorting out of the money calls in the January contract. We recommend initiating the position toward the end of the session to get the benefit of a rally, which is typical on the last trading day of the year. Strikes selected should be based upon your risk tolerance.The March S&P 500 E-mini remains on a short-term sell signal, but an intermediate term buy signal.”