For Bloomberg access:{OIAR<GO>}

WTI crude oil:

February WTI crude oil lost 25 cents on light holiday volume of 519,594 contracts. Total open interest declined by 3,424 contracts, which relative to volume is approximately 65% below average. The January contract accounted for loss of 18,217 of open interest. As this report is being compiled on December 22, the February contract is trading 52 cents above yesterday’s close and has made a daily high of 36.54, which is above yesterday’s print of 36.10, but below the December 18 high of 36.94. The spread between February WTI and February Brent crude oil has narrowed to just 3 cents premium to February Brent. We have no recommendation.

Cocoa: On December 21, March cocoa generated short and intermediate term sell signals.

Dollar index:

The March dollar index lost 36.2 points on volume of 21,116 contracts. Total open interest declined by a massive 3,180, which relative to volume is approximately 420% above average meaning liquidation was off the charts heavy on yesterday’s decline. This follows the substantial open interest decline of 1,715 on December 18 when 29,826 contracts were traded and the March contract lost 58.9 points. While it’s healthy for open interest to decline on lower prices, the amount of liquidation is concerning.

The reason is the dollar index is not overbought and liquidation is occurring close to the 20 and 50 day moving averages of 98.779 and 98.228 respectively. The March contract will generate a short-term sell signal if the daily high is below OIA’s key pivot point for December 22 of 98.007 and the rally will continue if the daily low is above OIA’s pivot point for December 22 of 98.704.  The March contract remains on short and intermediate term buy signals. We have no recommendation.

Euro:

March euro advanced 61 pips on light holiday volume of 135,187 contracts. Total open interest declined by 314 contracts, which relative to volume is approximately 85% below average. As this report is being compiled on December 22, the March contract is trading 41 pips higher and has made a daily high of 1.1011, which is the highest print since 1.1040 made on December 16.

The March contract will generate a short-term buy signal if the daily low is above OIA’s key pivot point for December 22 of 1.0976 and the downtrend will resume if the daily high is below OIA’s pivot point for December 22 of 1.0872. The March contract remains on short-and intermediate term sell signals. We have no recommendation.

Yen: On December 21, the March generated a short-term buy signal, but remains on an intermediate term sell signal.

The March yen advanced 12 pips on volume of 84,698 contracts. Total open interest declined by a massive 7,372 contracts, which relative to volume is approximately 250% above average meaning liquidation occurred while the yen was advancing and it spent most of the day on the plus side.

OIA believes the yen has terrific bullish prospects and it should trade inversely to the S&P 500. Since we are bearish the S&P 500, the yen should resume its advance after it has pulled back from 1-3 days, which is typical after the generation of a buy signal, or the S&P 500 resumes its decline. As we have pointed out in previous reports, the 50, 100 and 200 day moving averages are converging in the .8251 area and as this report is being compiled on December 22, the March contract is trading above the moving averages. Stand aside for now.

S&P 500 E-mini:

The S&P 500 E-mini advanced 23.00 points on light holiday volume of 1,276,348 contracts. Total open interest declined by a massive 599,260 contracts and this was due to the expiration of the December contract. As this report is being compiled on December 22, the Santa Claus rally continues with the March contract trading 9.25 points above yesterday’s close and has made a daily high of 2025.50, which is the highest print since 2029.75 made on December 18.

Clients should begin to think about bearish positions in the E-mini, and though we expect the rally to continue for at least another day or two, we think it is a move on borrowed time. On December 11, the March contract generated a short-term sell signal, but remains on an intermediate term buy signal. An intermediate term sell signal will be generated if the daily high is below OIA’s key pivot point for December 22 of 1985.45. Stand aside for now.