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Live cattle: On February 23, April live cattle generated a short-term buy signal, but remains on an intermediate term sell signal.

April live cattle advanced 87 points on volume of 40,897 contracts. Total open interest increased only 244 contracts, which relative to volume is approximately 70% below average. However, the February contract accounted for loss of 1,046 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in February and increase total open interest. On February 24, the April contract is trading 85 points higher and has made a daily high of 1.36 400, which is the highest print since 1.36725 made on February 4. We have no recommendation.

WTI crude oil:

April WTI crude oil lost $1.52 on light volume of 897,781 contracts. Volume fell substantially from February 22 when the April contract gained 1.64 on volume of 997,890 contracts and total open interest increased by 15,977. On February 23, total open interest increased by 7,570, which relative to volume is approximately 60% below average, but an open interest increase on yesterday’s price decline is negative. The March contract accounted for a loss of 842 of open interest.

However, when taking into account the low volume and tepid open interest increase, yesterday’s action was not all that bearish. As this report is being compiled on  February 24, after the release of the EIA report, the April contract is trading 24 cents above yesterday’s close after making a daily low of 30.56, which takes out the February 17 low of 30.81. April WTI remains on a short and intermediate term sell signal.

Brent crude oil:

April Brent crude oil lost $1.42 on heavy volume of 1,044,503 contracts. Volume was substantially higher than February 22 when the April contract gained 1.68 on volume of 662,147 contracts and total open interest declined by 25,914. On February 23, total open interest increased by 19,566 contracts, which relative to volume is approximately 50% below average, but an open interest increase on yesterday’s decline is negative. Additionally, the April contract lost 16,848 of open interest, which means there were more than enough open interest increases in the forward months to offset the decline in April and increase total open interest.

As this report is being compiled on February 24, the April contract is trading 97 cents higher compared to the April WTI contract, which is trading 12 cents above yesterday’s close. The April contract has made a high of 34.46, which takes out yesterday’s print of 33.53, but is below the February 22 high of 34.97. It appears likely the Brent contract will be the first to generate a short-term buy signal. At this juncture we have no recommendation.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 3.5 million barrels from the previous week. At 507.6 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories decreased by 2.2 million barrels last week, but are well above the upper limit of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories decreased by 1.7 million barrels last week but are above the upper limit of the average range for this time of year. Propane/propylene inventories fell 3.7 million barrels last week but are well above the upper limit of the average range. Total commercial petroleum inventories decreased by 5.0 million barrels last week.

Gold:

April gold advanced $12.30 on heavier than normal volume of 200,877 contracts. Volume increased from February 22 when the April contract lost 20.70 on volume of 166,424 contracts and total open interest declined by 5,100. On February 23, total open interest exploded higher up 8,265 contracts, which relative to volume is approximately 35% above average meaning that aggressive new buyers were entering the market and driving prices higher (1228.90). From a volume and open interest standpoint relative to the price advance the performance was outstanding. The fact that volume increased substantially on yesterday’s rally compared to the relatively low volume when gold declined on February 22 reinforces the bullish set up.

As this report is being compiled on February 24, the April contract is trading $16.90 higher after making a new high for the move of 1254.30 when the equity market was in free-fall in today’s early going. Now that the equity market has rallied gold has pulled back approximately $15.00 from the high. Although we are seeing positive price volume and open interest action, OIA wants to see the 50 day moving average cross above the 200 day moving average before we are willing to get on the bullish bandwagon.

Australian dollar: On February 23, the March Australian dollar generated an intermediate term buy signal after generating a short-term buy signal on February 4.

The March Australian dollar lost 14 pips on volume of 78,447 contracts. Total open interest increased by 1,996 contracts, which relative to volume is average. As this report is being compiled on February 24, the March contract is trading 25 pips lower and has not taken out yesterday’s high for the move of 72.53. We have no recommendation.

Yen:

The March yen advanced 62 pips on volume of 173,202 contracts. Total open interest increased by 2,851 contracts, which relative to volume is approximately 35% below average, but an open interest increase on yesterday’s strong advance is bullish. As this report is being compiled on February 24, the March yen is trading 44 pips higher and has made a new high for the move of .9010. We recommend a stand aside posture in the yen.

S&P 500 E-mini:

The March S&P 500 E-mini lost 20.05 points on volume of 1,609,995 contracts. Volume increased from February 22 when the March contract gained 21.75 points on volume of 1,429,014 contracts, which was the lowest volume of 2016 and total open interest increased by 12,758 contracts.

On February 23, total open interest increased only 1,273 contracts. For the past two days, total open interest relative to price advances and declines has been acting somewhat bullish. As this report is being compiled on February 24, the March contract is trading 2.75 points lower after making a low in the early going of 1886.75, which is the lowest print since 1881.50 made on February 17.

In yesterday’s report, we said that the market would correct to the 1900-1910 area and were obviously wrong about this, but right that the S&P 500 would have a correction lasting beyond the minor loss of February 19 after the buy signal of February 18. February 24 is the third day of corrective activity.

As this report is being compiled on February 24, the March contract is trading 2.50 higher and has made a daily high of 1920.25, which is below yesterday’s print of 1938.00. The March contract is headed for a test of the February 22 high of 1943.75.

From the February 22 report on the S&P 500 E-mini written on February 23:

“On February 18, OIA announced the March S&P 500 E-mini generated a short-term buy signal. As clients know, with our protocols we expect a pullback that lasts from 1-3 days and this is the opportunity to initiate bullish positions. On February 19, the E-mini had a shallow pullback, but as we indicated in yesterday’s report, we have been expecting more of a correction before the market resumed its uptrend.”

“We envision a further correction down to the 1910-1900 area before the market turns around and heads higher. We recommend waiting for at least another day before considering bullish positions.”