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Copper:

May copper advanced 5.20 cents on huge volume of 120,878 contracts. Volume was the strongest since February 16 when 132,160 contracts were traded and the May contract closed at $2.0565. On February 26, total open interest declined by a sizable 5,222 contracts, which relative to volume is approximately 75% above average meaning liquidation was extremely heavy on the strong advance. The May contract made a high of 2.1640, which is the highest print since the week of November 23.

As this report is being compiled on February 29, the May contract is trading nearly unchanged and has not taken out Friday’s high. On February 4, May copper generated a short-term buy signal, and for an intermediate term buy signal to occur, the low of the day must be above OIA’s key pivot point for February 29 of 2.1004. We have no recommendation.

WTI crude oil:

April WTI lost 29 cents on volume of 1,133,330 contracts. Total open interest declined by 26,021 contracts, which relative to volume is approximately 10% below average. The April contract accounted for a loss of 28,831 contracts. As this report is being compiled on February 29, the April contract is trading sharply higher, up $1.11 or + 3.39%.

In our research note of February 28 titled: Dollar Index Near Buy Signal-S&P 500 Sideways To Higher-Firmer Oil Supports, we said that April WTI would likely generate a short-term buy signal and that firmer petroleum product prices would support the advance. 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 29 of $33.51.

Dollar Index Near Buy Signal-S&P 500 Sideways To Higher-Firmer Oil Supports:

“On February 8, April heating oil generated a short-term buy signal, and it appears likely that April gasoline will generate a short-term buy signal this week. Year to date, heating oil is the out performer compared to gasoline and has lost 8.38% versus a loss for gasoline of 14.33% If  gasoline generates a short term buy signal, firmer product prices should support WTI and a short-term buy signal should be generated in the April contract.”

Brent crude oil: On February 26, May Brent crude oil generated a short-term buy signal, but remains on an intermediate term sell signal.

May Brent crude oil lost 26 cents on strong volume of 1,068,570 contracts. Volume exceeded that of February 25 when the May contract advanced 63 cents on volume of 977,118 contracts and total open interest declined by 14,585. On February 26, total open interest declined by 29,074 contracts, which relative to volume is average. On Friday, the May contract made a high of 37.26, which is the highest print since 37.57 made on January 5.

As this report is being compiled on February 29, the May contract has made a high of 36.73 and is trading $1.20 above Friday’s close. Usually, after the generation of a short-term buy signal, markets have a tendency to pullback from 1-3 days and the pullback is the opportunity to enter bullish positions. It appears likely that gasoline will generate a short-term buy signal in tomorrow’s trading and conceivably WTI may as well. Once the pullback occurs, a light bullish position may be a relatively low risk opportunity. We recommend using options rather than futures.

Dollar index: On February 29, the March and June dollar index will generate short-term buy signals, but remain on intermediate term sell signals.

The March dollar index advanced by a strong 89.3 points on surprisingly light volume of 28,457 contracts. Total open interest declined by a massive 1,928, which relative to volume is approximately 185% above average meaning there was massive liquidation on the part of longs and shorts as the March contract moved to its highest level since 98.955 made on February 3. As this report is being compiled on February 29, the March contract is trading 14 points higher and has made another new high for the move of 98.390. We have no recommendation.

Euro: The March and June euro will generate short-term sell signals on February 29, but remain on intermediate term buy signals.

The March euro lost 1.13 cents on fairly heavy volume of 244,686 contracts. Total open interest declined by 3,922 contracts, which relative to volume is approximately 35% below average. As this report is being compiled on February 29, the March contract is trading lower again, down 57 pips and has made a new low for the move of 1.0862, which is the lowest print since 1.0825 made on February 1. The head of the European Central Bank will be making an announcement regarding additional quantitative easing measures on March 10, and the market is anticipating a more aggressive stance. At this juncture, we recommend a stand aside posture.

British pound:

The March British pound lost 1.13 cents (identical loss as the euro) on volume of 98,144 contracts. Total open interest increased by a sizable 4,063 contracts, which relative to volume is approximately 50% above average meaning aggressive new short-sellers were entering the market in substantial numbers and driving prices to a new contract low of 1.3854, which is the lowest print since 1.3492 made during March 2009.

As this report is being compiled on February 29, the pound is having one of its rare rallies, trading 45 pips higher on the day, but has made another new contract low of 1.3835. Perhaps the biggest surprise in the COT report released on Friday was the relatively low ratio of bearish positions of leverage funds. The report showed that leverage funds are short by ratio of 2.28:1, which is the same as the previous week and down from the high ratio two weeks ago of 2.63:1.

The high short ratio in the currencies that we follow is the Canadian dollar and leverage funds are short by 6.06:1, yet the performance of the Canadian dollar compared to the British pound during the past month is as different as night and day. We expect more short sellers to join the party. Stand aside.

Canadian dollar: On February 26, the March and June Canadian dollar generated intermediate term buy signals after generating short term buy signals on February 1.

The March Canadian dollar advanced 3 pips on volume of 69,205 contracts. Total open interest declined by a massive 4,176 contracts, which relative to volume is approximately 140% above average meaning liquidation was extremely heavy on the modest advance. The March contract made a high of 74.05, which is the highest print since early December 2015.

As we alluded to in the report on the British pound, leverage funds remain massively short the Canadian dollar and with crude oil beginning to perform better, we see no reason why the advance in the Canadian dollar cannot continue. Our next target is 75.85, and are looking for the short ratio of leverage funds to decline substantially before we consider recommending bearish positions.

S&P 500 E-mini:

The S&P 500 E-mini lost 7.75 points on volume of 1,888,504 contracts. Total open interest declined just 5,764. As this report is being compiled on February 29, the March contract is trading 5.50 points higher and has made a daily high of 1956.25, which is below Friday’s print of 1968.75 made during the early morning hours of Friday.

As we pointed out in our report: Dollar Index Near By Signal-S&P 500 Sideways To Higher-Firmer Oil Supports, we think that short sellers will add fuel to the upside move, however once the March contract begins to trade above its median level of 1968 (SPX 1972.41), we think the E-mini will begin to struggle.

On February 18, OIA announced that the S&P 500 E-mini along with the Dow Jones Industrial Average, S&P 400 and the New York Composite Index generated short-term buy signals. All remain on intermediate term sell signals. We have no recommendation at this juncture.

Dollar Index Near Buy Signal-S&P 500 Sideways To Higher-Firmer Oil Supports:

During the rallies of February 22, (21.75 points), February 24 (14.25 points) and February 25 (20.25 points) in the S&P 500 E-mini, total open interest increased each day. This is very positive considering that large numbers of short-sellers entered the market on the decline. This means if the S&P 500 market grinds higher as we expect, short-sellers will continue to add fuel to the upside move. However, once the SPX begins to trade above its median price of 1972.41, (May 18, 2015 high 2134.72-February 11 low 1810.10), we expect the index to engage in a major struggle to move higher.