For Bloomberg access:{OIAR<GO>}

Coffee: On December 31, March coffee generated a short-term buy signal, but remains on an intermediate term sell signal.

March coffee advanced 3.05 cents on volume of 19,343 contracts. Total open interest increased by 580 contracts, which relative to volume is approximately 5% above average. The March contract accounted for loss 1,159 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in March and increase total open interest slightly above average. This is the most positive performance that we’ve seen for coffee since it began its rally a couple of days ago.

As this report is being compiled on January 4, March contract is trading 1.25 cents lower and has made a daily low of 1.2205, which is the lowest print since 1.2125 made on December 30. Usually, after the generation of a short-term buy signal, markets have a tendency to pullback from 1-3 days before resuming the uptrend. The problem with coffee is that fundamentals are not terribly bullish at this juncture. However there is a seasonal tendency for coffee prices to rise very strongly in January and February. For the March contract to generate an intermediate term buy signal, the low of the day must be above OIA’s key pivot point for January 4 of 1.2500. We have no recommendation.

WTI crude oil:

February WTI crude oil gained 44 cents on volume of 481,192 contracts. Total open interest increased by a massive 21,445 contracts, which relative to volume is approximately 75% above average meaning aggressive new buyers were entering the market and driving prices higher (37.79).

As this report is being compiled on January 4, the February contract is trading 32 cents lower after making a daily high of 38.39, which is the highest print since 38.28 made on December 24. The rally was due to the increasing tensions between Iran and Saudi Arabia and the breaking off of diplomatic relations between the two. We view this as bearish because it is well known that Saudi Arabia has been fighting a proxy war against Iran and Russia by dramatically increasing production and crashing crude oil prices, which hurts the highest cost producers and benefits the low cost producers like Saudi Arabia. This may usher in even lower prices with Saudi Arabia determined to punish Iran in particular. We have no recommendation.

Dollar index:

The March dollar index advanced 39.1 points on light volume of 19,182 contracts. However, total open interest exploded higher by 4519 contracts, which relative to volume is an astounding 640% above average meaning huge numbers of new aggressive buyers were entering the market in large numbers and driving prices higher (98.845). As this report is being compiled on January 4, the March contract is trading 35 points higher and has made a daily high of 99.300 and a low of 98.110. On December 28, the March dollar index generated a short-term sell signal, and for this to reverse, the low of the day must be above OIA’s key pivot point for January 4 of 98.821. We have no recommendation.

Euro:

The March euro lost 58 pips on volume of 85,799 contracts. Total open interest increased by 1,008 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on January 4, the March contract is trading 46 pips lower after making a daily high of 1.0966. On December 28, the March contract generated a short-term buy signal and for a sell signal to occur, the daily high must be below OIA’s key pivot point for January 4 of 1.0881 and the high has been considerably above this on January 4. We have no recommendation. The March contract remains on an intermediate term sell signal.

Yen:

The March yen advanced 24 pips on volume of 57,473 contracts. Total open interest increased by a massive 6,023 contracts, which relative to volume is approximately 320% above average meaning aggressive new buyers were entering the market and driving prices higher (.8346).

As this report is being compiled on January 4, the yen has rocketed higher to make a new high for the move of .8436, but has pulled back as the equity market has begun to rally. On December 21, OIA announced that the March contract generated a short-term buy signal and an intermediate term buy signal on December 29. We have no recommendation.

S&P 500 E-mini:

The S&P 500 E-mini lost 19.00 points  On volume of 1,033,135 contracts. Total open interest increased by 6,378 contracts, which relative to volume is approximately 70% below average, however an open interest increase on last week’s decline is bearish. As this report is being compiled on January 4, the March contract has crashed, down 41.50 points, but has rallied up from the low of 1980.25.

On December 11, OIA announced that the March contract generated a short-term sell signal and for an intermediate term sell signal to be generated the daily high must be below OIA’s key pivot point for January 4 of 2019.45. We expect this to occur in tomorrow’s trading.

In the December 30 report, we recommended shorting out of the money calls in the January contract and this trade has worked out splendidly. We recommend holding these positions into expiration, which occurs on January 15

 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.”