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Dollar Index:

The September dollar index lost 40.8 points on volume of 56,775. Total open interest increased by 557,which relative to volume is approximately 50% below average, but an open interest increase on yesterday’s decline is bearish. This is the second day in a row that the September contract has declined in price and total open interest increased.

As this report is being compiled on September 2, the September contract is trading 39.4 points higher and has made a daily high of 95.945, which takes out yesterday’s print of 95.890. For the September contract to generate a short term buy signal, the low of the day must be above OIA’s key pivot point for September 2 of 96.702.  The downtrend will resume if the September contract makes a daily high below OIA’s pivot point for September 2 of 95.782. The September dollar index remains on short and intermediate term sell signals.We have no recommendation.

Euro:

The September euro gained 57 pips on volume of 254,864. Total open interest declined by 878 contracts, which relative to volume is approximately 85% below average, but an open interest decline on yesterday’s price advance is negative. This is the second day in a row that the euro has advanced and total open interest has declined. The September contract lost 4,335 of open interest.

As this report is being compiled on September 2, the September contract is trading 54 pips lower and has a daily low of 1.1224, which is above yesterday’s print of 1.1210. For the rally to resume, the low of the day must be above OIA’s pivot point for September 2 of 1.1244. A short term sell will be generated if the daily high is below OIA’s key pivot point for September 2 of 1.1102. The September euro remains on short and intermediate term buy signals.

British Pound:

The September British pound lost 42 pips on volume of 104,924 contracts. Total open interest increased by a sizable 3,408 contracts, which relative to volume is approximately 20% above average meaning that new short sellers entered the market in large numbers and were driving the pound to a new low for the move of 1.5298, which is the lowest print since 1.5247 made on June 6.

The large open interest increase in yesterday’s trading may signal the pound is nearing a bottom and that the counter trend rally, which we have been discussing since the pound generated sell signals is at hand. The reason we say this is that computer programs, which drive much of trading have a tendency to enter the market at oversold levels, and the eventual counter trend rally forces the new short sellers to cover.

As this report is being compiled on September 2, the September contract is trading 13 pips above yesterday’s close and has made another new low for the move of 1.5263. On August 27, the September and December pound generated short and intermediate sell signals. Be patient and wait for the rally before initiating bearish positions.

Yen:

The September yen advanced 91 pips on volume of 240,824 contracts. Volume more than doubled from August 31 when the September contract gained 17 pips on volume of 118,508 and total open interest increased by 1,381. On  September 1, total open interest increased by a strong 6,601 contracts, which relative to volume is average.

Managed money is heavily net short the yen according to last week’s COT report and the past two days’ open interest increases on price advances indicate that short covering is NOT powering prices higher, rather it is NEW buying. This means that potentially distressed short sellers can add fuel to the upside if prices continue to advance.

As this report is being compiled on September 2, the September contract is trading 25 pips lower and has made a low of .8302, which is above yesterday’s print of .8248. The September and December yen remain on short and intermediate term buy signals. For a short term sell signal to occur, the daily high must be below OIA’s key pivot point for September 2 of .8138. We have no recommendation.

WTI crude oil:

October WTI crude oil lost $3.79 on heavy volume of 1,335,539 contracts. Volume declined from the 2015 record setting volume of 1,385,866 when the October contract advanced $3.98 and total open interest increased by 36,644. On September 1, total open interest declined by a hefty 31,129, which relative to volume is approximately 10% below average. It appears the group that got suckered into the rally were heading for the exit on Tuesday.

Yesterday, the October contract made a low of $44.15, which was below yesterday’s pivot point of 45.02 for the generation of a short term buy signal and also fell below the August 31 pivot of 44.69. As a result, October WTI  did not generate a short term buy signal yesterday, nor did it on September 2. 

As this report is being compiled on September 2, the October contract is trading 68 cents above yesterday’s close, but made a low of 43.21, which takes out the August 31 low of 43.60 after Wednesday’s release of the EIA report. For October WTI  to generate a short term buy signal the daily low must be above OIA’s key pivot point for September 2 of $45.07. The decline will resume if the daily high is below OIA’s pivot point for September 2 of 42.95. We have no recommendation

From the August 31 report on WTI: 

“It is likely that market participants who has been buying during the past couple of days are liquidating in today’s trade.If this is the case, total open interest should decline and we will report on this tomorrow.”

The Energy Information Administration announced on September 2 that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 4.7 million barrels from the previous week. At 455.4 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories decreased by 0.3 million barrels last week, and are in the middle of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories increased by 0.1 million barrels last week but are in the middle of the average range for this time of year. Propane/propylene inventories rose 0.6 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories increased by 5.7 million barrels last week.

Brent crude oil:

October Brent crude oil lost $4.59 on heavy volume of 1,057,621 contracts. Volume exceeded August 27, 28 and 31 when Brent advanced by triple digits during each of those three days. On September 1, total open interest increased by 10,879, which relative to volume is approximately 50% below average, but yesterday’s open interest increase indicates that short sellers were in control. This is a stark contrast to WTI in which liquidation of previous long positions was the order of the day.

Like WTI, Brent was unable to make a daily low above the pivot point yesterday and therefore did not generate a short term buy signal on September 1. Additionally, Brent will not generate a short term buy signal on September 2. For a short term buy signal to be generated, the low of the day must be above OIA’s key pivot point for September 2 of $50.26. We have no recommendation.

From the August 31 report on Brent:

“The open interest action in Brent has been a shadow compared to WTI: From August 27 through August 31, the October contract has advanced $11.01 while total open interest has advanced only 3,722 contracts in this time frame. This contrasts with WTI which experienced a three-day open interest increase of 63,511 contracts in the identical period.”

S&P 500 E mini:

The September S&P 500 E mini lost 53.25 points on volume of 2,864,540 contracts. Volume increased from August 31 when the September contract lost 20.50 points on volume of 1,897,833 and total open interest increased by 38,468. On September 1, total open interest increased by a massive 110,285 contracts, which relative to volume is 35% above average meaning huge numbers of new short sellers were entering the market and driving prices lower.

As this report is being compiled on September 2, the September contract is trading 13.25 points higher and has not taken out yesterday’s low of 1898.75. We have no recommendation at this juncture.