Bloomberg access:{OIAR<GO>}

Corn: May corn will generate a short-term buy signal if the daily low is above OIA’s key pivot point or February 22 of 3.71 7/8.

Soybeans: May soybeans will generate a short-term buy signal if the daily low is above OIA’s key pivot point for February 22 of 8.82 3/8.

Coffee: May New York coffee will generate a short-term buy signal if the daily low is above OIA’s key pivot point for February 22 of 1.2020

WTI crude oil:

April WTI crude oil lost $1.18 on very light volume of 922,934 contracts. Volume was the weakest since January 15 when 961,527 contracts were traded and WTI lost $1.78 while open interest increased by 3,270. On February 19, total open interest declined by 11,537 contracts, which relative to volume is approximately 45% below average. The March contract accounted for a loss of 42,811 contracts.

As this report is being compiled on February 22, the April contract is trading $1.87 above Friday’s close and has made a daily high of 33.84, which is the highest print since 34.21 made on February 18. For the April contract to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point for February 22 of $33.50.

While WTI may struggle, we think a short-term buy signal will eventually be generated and from the seasonal point of view, prices tend to rise in the period immediately ahead. In the February 18 report, we noted that the oil volatility index was beginning to crater and on February 22, the index has made a new low for the move of 62.43, which is the lowest print since 61.86 made on February 1. We think this adds credence that crude oil may be generating a short-term buy signal within the next day or two.

From the February 18 report on crude oil:

“The oil volatility index $OVX made a recent high at 80.78 and today as this report is being written is trading at 65.73, down 2.64% even though crude oil is trading substantially lower. We are not as bearish as most people, and think the market has discounted a huge amount of bad news, but may need to trade in a consolidating pattern before generating a short-term buy signal.” 

Brent crude oil:

April Brent crude oil lost $1.27 volume of 765,359 contracts. Total open interest increased by a massive 37,030 contracts, which relative to volume is approximately 75% above average meaning aggressive new short-sellers were entering the market in large numbers and driving prices lower ($32.68). The April contract accounted for loss of 3,601 of open interest.

As this report is being compiled on February 22, the April contract is trading 1.85 higher and has made a daily high of 34.97, which is the highest print since 35.73 made on February 18. For the May contract to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point for February 22 of $34.70. We have no recommendation.

Euro:

The March euro advanced 38 pips on light volume of 172,766 contracts. Total open interest increased by 1,457 contracts, which relative to volume is approximately 55% below average. As this report is being compiled on February 22, the March contract is trading sharply lower down 1.14 cents, or -1. 03% and has made a daily low of 1.1008, which takes out the February 4 low of 1.1079 and is the lowest print since 1.0914 made on February 3.

Although in past reports, we said that we thought the euro would be heading higher, the talk about a Brexit with Britain leaving the European Economic Union is wreaking havoc with the euro and the pound. The March contract will generate a short-term sell signal if the daily high is below OIA’s key pivot point for February 22 of 1.0998. Stand aside.

Yen:

The March yen advanced 79 pips on volume of 138,883 contracts. Total open interest increased by 1,679 contracts, which relative to volume is approximately 45% below average. As this report is being compiled on February 22, the March contract is trading 43 pips lower on light volume. The March yen remains on short and intermediate terms buy signals. We have no recommendation except to stand aside.

Swiss Franc: The March Swiss franc will generate short and intermediate term sell signals if the daily high is below OIA’s key pivot point for February 22 of 1.0015. The short and intermediate term sell signals have the identical pivot point on February 22.

S&P 500 E-mini: The Nasdaq 100 and Russell 2000 cash indices will generate short term buy signals on February 22.

The March S&P 500 E-mini lost 2.00 points on light volume of 1,624,867 contracts. Volume increased slightly from February 18 when the March contract lost 6.25 points on volume of 1,619,959 contracts and total open interest declined by 6,636 contracts. On February 19, total open interest increased just 2170 contracts.

As this report is being compiled on February 22, the March contract is trading sharply higher, up 25.75 points on light volume. In yesterday’s report, on the S&P 500, we pointed out that the NASDAQ 100 and Russell 2000 had not yet generated short-term buy signals, but on February 22, buy signals will be generated.

This increases the likelihood that the rally will continue, however since generating a short-term buy signal on February 18, the March contract has only had 1 very shallow correction, which occurred on February 19. Typically, the correction lasts from 1-3 days immediately after the buy signal. When a market continues to rally after the generation of a buy signal, the correction will occur from higher levels. Do not chase the rally. Wait for the correction.

From the February 21 report on the equity indices:

“On Friday, February 19, the S&P 500 had a shallow pullback, but we expect more of  a correction before the market resumes its uptrend. The pullback could extend to the 1885-1890 area, but should hold at the 1882.00 level. A close below 1882.00 would be very negative in our view, and likely push the S&P 500 down to 1862.00, which is the last area of support before a new sell signal is generated.”

“On the other hand, the more likely scenario is a move to the 50 day moving average of 1954.05 basis the S&P 500 cash index and 1946.30, the 50 day moving average for the March S&P 500 E-mini. If the S&P 500 cash index can make a daily low above the pivot point of 1932.60, we think the rally can continue to the 100 day moving average of 1999.47. For the March S&P 500 E-mini the pivot point is 1930.75 and the 100 day moving average is 1989.00″.