For Bloomberg access: {OIAR<GO>}

Volume in currency futures contracts increase as the near month (September) approaches expiration.

Dollar Index:

The September dollar index gained 2.3 points on heavy volume of 93,580. Total open interest increased by 1,662 contracts, which relative to volume is approximately 25% below average. As this report is being compiled on September 10, the September contract is trading sharply lower, down 48.5 points and has made a daily low of 95.465, which is the lowest print since 95.450 made on September 2. The September and December dollar indices remain on short and intermediate sell signals. Stand aside.

Euro:

The September euro gained 11 pips on volume of 436,266. Total open interest increased by 506 contracts, which is dramatically below average, but is the second consecutive day that total open interest increased on a price advance. As this report is being compiled on September 10, the September contract is trading sharply higher, up 71 pips and has made a daily high of 1.1281, which is the highest price since 1.1314 made on September 2.

We have been writing about a potential sell signal in the euro, which  has not materialized and the market has refused to break down. Despite today’s strong gain, the September contract must make a daily low above OIA’s pivot point of 1.1241 to continue the advance. The September and December euro remain on short and intermediate buy signals. Stand aside.

British Pound:

The September British pound lost 29 pips on heavy volume of 193,235. Total open interest declined by 1,983, which relative to volume is approximately 50% below average. As this report is being compiled on September 10, the September contract is trading sharply higher, up 90 pips and has made a daily high of 1.5477, which is the highest price since 1.5507 made on August 27, the day the September and December pound generated short and intermediate sell signals. We want to see further liquidation by short sellers on rallies, and also determine whether the sell signals could be reversed. Stand aside.

Yen:

The September yen lost 44 pips on heavy volume of 346,979. Total open interest declined by 4,731, which relative to volume is approximately 40% below average. As this report is being compiled on September 10, the September contract is trading 7 pips lower and has made a daily low of .8239, which is the lowest price since .8224 made August 31. For a short term sell signal to occur, the daily high must be below OIA’s key pivot point for September 10 of .8171. Stand aside.

WTI crude oil:

October WTI crude lost $1.79 on moderate volume of 800,775. Total open interest declined by only 4,543, which relative to volume is approximately 75% below average. The October contract lost 48,301 of open interest and the open interest increases in the forward months offset most of the decline in October.

As this report is being compiled on September 10, after the release of the EIA report, October WTI is trading$1.47 above yesterday’s close and has made a daily high of  45.95, which is the highest price since yesterday’s print of 46.26. For a short term sell signal to occur, the daily high must be below OIA’s key pivot point for September 10 of $43.19. For the advance to be sustained, the October contract must make a daily low above OIA’s pivot point of $45.34. Stand aside. October/November WTI remain on short term buy signals, but intermediate sell signals.

The Energy Information Administration announced on September 10 that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.6 million barrels from the previous week. At 458.0 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 increased by 0.4 million barrels last week, but are in the middle of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories increased by 1.0 million barrels last week but are in the middle of the average range for this time of year. Propane/propylene inventories rose 0.2 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories increased by 3.2 million barrels last week.

Brent crude oil:

October Brent crude lost $1.49 on relatively low volume of 697,988. Total open interest increased by 8,130, which relative to volume is approximately 45% below average. The October contract lost 9,478 of open interest and there were sufficient open interest increases in the forward months offset the decline in October and increase total open interest. Yesterday’s action was bearish for Brent, but somewhat positive for WTI.

As this report is being compiled on September 10, after the release of the EIA report, November Brent is trading $1.17 above yesterday’s close and has made a daily high of 49.86, which is substantially below yesterday’s print of 50.87. For a short term buy signal to occur, the daily low must be above OIA’s key pivot point for September 10 of $51.03. For the decline to resume, the November contract must make a daily high below OIA’s pivot point of 48.87. Stand aside. November Brent remains on short and intermediate sell signals.

Cocoa:

December cocoa gained $50.00 on volume of 32,146. Total open interest increased again massively on a price advance for the third day in a row by 3,949 contracts, which relative to volume is approximately 425% above average. As this report is being compiled on September 10, the December contract is trading $5.00 above yesterday’s close and has made a new high for the move of $3,295, which takes out the previous high print of $3,273 made on July 23., The contract high was made on July 15 at $3,375.

On September 8 OIA announced that December cocoa generated short and intermediate buy signals, and since September 4, the market has rocketed higher without a set back. We have advised a stand aside posture until cocoa has corrected its action of the past few sessions. Much like the pound when it slid for several consecutive sessions after the sell signals, and then rallied sharply, cocoa is likely to experience sharp corrective action after the buy signals. Stand aside.

Copper: On September 9, December copper generated a short term buy signal, but remains on an intermediate sell signal.

December copper gained 25 ticks on volume of 69,006. Total open interest declined by a massive 3,866, which relative to volume is approximately 120% above average, meaning liquidation was extremely on the relative narrow range day. (5.70 cents). As this report is being compiled on September 10, the December contract is trading 30 ticks higher and has not taken out yesterday’s high of $2,4755, which is the highest print since $2.4895 made on July 22. On August 24, the December contract made a multi -year low of 2.2025. DO NOT ENTER NEW SHORT OR LONG positions in copper.

Gold: On September 10, December gold will generate a short term sell signal, which reverses the short term buy signal of August 20. December gold remains on an intermediate sell signal. 

December gold lost $18.70 on volume of 204,970. Total open interest declined by 3,837, which relative to volume is approximately 25% below average. As this report is being compiled on September 10, December gold is trading $7.60 above yesterday’s close, but the daily high of $1114.10 is below OIA’s key pivot point for September 10 of $1116.10, which triggers the generation of a short term sell signal. The market should rally for 1-3 days before heading lower. Stand aside.

From the September 6 weekend Wrap on gold:

“December gold is getting close to generating a short-term sell signal, and the key pivot point for September 4 is $1117.60. Though this will change somewhat on September 7, it provides a frame of reference for Monday’s trading. December gold closed at $1121.40 on September 4. For a short-term sell signal to occur, the high of the day must be below the pivot point, and we think this is likely during the coming week.”

“For the rally to resume, the December contract must make a daily low above OIA’s key pivot point for September 4 of $1134.80. We think this is unlikely.”

S&P 500 E mini:

The September S&P 500 E mini lost 23.00 points on volume of 2,367,913. Total open interest increased by 20,466, which relative to volume is approximately 50% below average, but continues the pattern of bearish open interest action on advances and declines. As this report is being compiled on September 10, the September contract is trading 16.00 points higher after making a low of 1928.50 on September 10, which is below yesterday’s print of 1935.50 and the September 8 low of 1930.00. The indices are going to be buffeted by the tail of the Federal Reserve and by this time next week, the tale will be told. We have no recommendation at this juncture.