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Sugar #11: On February 24, May New York sugar generated a short-term buy signal, but remains on an intermediate term sell signal.

Cocoa: On February 25, May New York cocoa generated a short-term buy signal, but remains on an intermediate term sell signal.

WTI crude oil: April WTI crude oil will generate a short-term buy signal if the daily low is above OIA’s key pivot point for February 25 of $33.46.

April WTI crude oil advanced 28 cents on volume of 1,095,504 contracts. Volume was the strongest since February 17 when the April contract gained $2.01 on volume of 1,487,268 contracts and total open interest declined by 57,512. On February 24, total open interest declined just 7,957, which relative to volume is approximately 70% below average. The March contract accounted for a loss of 1,142 of open interest.

Yesterday, the April contract made a high of 32.40, which was below the February 23 high of 33.53 and then proceeded to sell off for the remainder of the session while closing modestly higher. As this report is being compiled on February 25, the April contract is trading 63 cents lower and has made a daily low of 31.07, which is above yesterday’s print of 30.56.

As we have said before, we think the Brent contract will be the first to generate a short-term buy signal. Gasoline is getting close to generating a short-term buy signal and this will occur if the daily low in the April contract is above OIA’s key pivot point for February 25 of 1.2905. With heating oil already on a short-term buy signal, WTI prices should garner support from the products, at least enough to eventually generate a short-term buy signal. We have no recommendation.

Brent crude oil: May Brent crude oil will generate a short-term buy signal if the daily low is above OIA’s key pivot point for February 25 of $34.78.

April Brent crude oil advanced $1.14 on volume of 1,028,647 contracts. Total open interest increased by 9,215 contracts, which relative to volume is approximately 55% below average. The March contract accounted for loss of 25,054 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in April and increase total open interest slightly. As this report is being compiled on February 25, the April contract is trading 53 cents lower and has made a daily low of 33.29, which is above yesterday’s print of 32.37.

May Brent has made a daily high of 36.12 on February 25, which easily takes out the February 24 print of 34.66. With all the chatter about crude oil, it’s remarkable it is never mentioned that Brent crude oil bottomed on January 20, well over a month ago. We have no recommendation.

Gold:

April gold advanced $16.50 on heavy volume of 291,325 contracts. Total open interest increased by 7,549 contracts, which relative to volume is average. Yesterday, gold made a daily high of $1254.30, which was the highest print since 1263.90 made on February 11, but was unable to hold the gain as equities rallied from the lows shortly after the opening of the cash markets in New York and then made a daily low of 1222.40.

As this report is being compiled on February 25, the April contract is trading 2.70 higher and has made a daily high of 1244.40 and a low of 1221.80. We are seeing a consistent pattern in gold: it rallies when equity markets are sharply lower and declines when equity markets rally. We are waiting for the 50 day moving average to cross above the 200 day moving average. We have no recommendation other than to say a stand aside posture makes the most sense at this juncture.

British pound:

The March British pound lost 1.03 cents on volume of 119,654 contracts. Total open interest exploded higher up by 5,639 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 to a new contract low of 1.3878.This is the lowest print since March 2009 when the March contract made a low of 1.3653.

On February 23, the March pound lost 1.35 cents on volume of 95,577 contracts and total open interest increased again by 4,436. It appears the entire speculative community is piling into the pound with all the chatter about a possible UK exit from the European economic union. The vote will occur in June and based upon the way the pound is trading, we expect to see lower prices ahead.

However, if the vote is to stay in the union, the pound will move sharply higher. We recommend a stand aside posture because sentiment can shift rapidly and as it shifts, large numbers of short-sellers may find themselves caught at the bottom end of the trading range.

Yen:

The March yen advanced 31 pips on volume of 170,812 contracts. Total open interest increased by 582 contracts, which relative to volume is approximately 80% below average, but an open interest increase on yesterday’s price advance is positive. Yesterday, the March yen made a high of .9010, which is the highest print since .9017 made on February 11.

As this report is being compiled on February 25, the yen is trading sharply lower, down 98 pips or -1.1%. We have been cautioning clients to stand aside and see no reason to be involved in the currency, especially with the Japanese Central Bank determined to drive the yen lower.

S&P 500 E-mini:

The March S&P 500 E-mini advanced 14.25 points on heavier than normal volume of 2,326,578 contracts. Volume exceeded that of February 22 when the March contract gained 21.75 points on volume of 1,429,014 contracts and total open interest increased by 12,078. Additionally, volume on February 24 exceeded that of February 17 when the March contract gained 34.00 points on volume of 1,862,683 and total open interest declined by 18,703.

From a volume point of view, yesterday’s action was outstanding, especially because it was a major reversal day when the March contract made a low of 1886.75 in the early going. On February 24, total open interest increased by 19,750, which relative to volume is approximately 55% below average, and an open interest increase on yesterday’s advance was positive. Yesterday, the March contract made a high of 1933.75 and this has been taken out on February 25 with another new print of 1940.75, the highest price since 1943.75 made February 22.

For the current rally to continue, the March contract must make a daily low above OIA’s pivot point for February 25 of 1933.50. In the February 21 report, we mentioned this and the pivot point has moved somewhat since then (see extract below). As stated before, we do not think this is the beginning of a new bull market, rather the market is seeking equilibrium after the immense  bearishness in January and the first half of February.

On February 18, OIA announced that the March S&P 500 E-mini generated a short-term buy signal. The Dow Jones Industrial Average, S&P 400 along with the New York Composite index all generated short-term buy signals on February 18 as well. On February 22, the NASDAQ 100 and Russell 2000 cash indices generated short-term buy signals.

From the February 21 Special Report on Equity Indices: 

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.