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WTI crude oil: May and June WTI will generate short-term buy signals on April 12, which will reverse the April 4 short-term sell signals. Both contracts remain on intermediate term buy signals.

May WTI crude oil gained 64 cents on heavy volume of 1,361,756 contracts. Volume declined from April 8 when the May contract gained $2.46 on record volume of 1,613,844 contracts and total open interest increased just 166 contracts. On April 11, the total open interest increase was a disappointment for the second day in a row and increased by only 1,732. The May contract lost 66,200 of open interest.

In summary, on April 10 and 11 the May contract gained $3.10, yet total open interest increased by only 1,898 contracts during the two day period. This indicates a reluctance on the part of new buyers to make commitments at ever higher prices.

As this report is being compiled on April 12, the May contract is trading $1.42 above yesterday’s close and has made a daily high of 41.94, which is the highest print since 41.90 made on March 22.

In the April 7 research note on WTI, we told clients to liquidate any bearish positions that they may have entered on the rally because we thought it was possible for the short term sell signal to reverse due to the very strong move on April 8. This proved to be the case and it now appears the high for the move of 42.49 made on March 18 will be tested and likely taken out. We have no recommendation

From the April 7 research note on WTI:

“On April 4, OIA announced that May and June WTI generated short-term sell signals and that they remained on intermediate term buy signals. Since then the May contract has rallied on two previous days (April 5 and 6) and April 8 is the third day of the counter trend rally. There does not appear to be any special news that accounts for today’s strong move. Conceivably, the market knows something that news is not revealing.”

“The May and June contracts are at a pivotal point and the May contract will reverse the short-term sell signal of April 4 if the daily low is above OIA’s key pivot point for April 8 of $39.44. Looking at the volume stats for yesterday, the May contract traded 590,386 while the June contract traded 239,154. On April 8 thus far, volume for the May contract is 497,482 and for June 183,404, but the market doesn’t close for several more hours. The May contract has made a daily high of 39.84, which is 1 cent below the March 30 high of 39.85 and 30 cents below the March 28 high of 40.14.”

“If bearish positions have been initiated on the rally as recommended in yesterday’s research, we suggest these be liquidated by the end of the session unless crude is trading below yesterday’s close. The uncharacteristic strength of today’s move in conjunction with the weekend may signal a release of some kind of bullish news.”

Brent crude oil: On April 11, June and July Brent crude oil generated short-term buy signals, which reversed the April 4 short-term sell signals. Both contracts remain on intermediate term buy signals.

June Brent crude oil advanced 89 cents on volume of 772,678 contracts. Total open interest increased by a sizable 17,877 contracts, which relative to volume is approximately 10% below average, but a total open interest increase on yesterday’s price advance is bullish. The June contract lost 13,664 of open interest, which means there was more than enough open interest increases in the forward months to offset the decline in June and increase total open interest slightly below average.

The performance for the June Brent contract relative to total open interest has been outstanding compared to the performance of the May WTI contract relative to total open interest. For the past two days, June Brent has advanced $3.40 and total open interest has increased by 46,675 contracts compared to the WTI increase for the past two days of 1.898. 

As this report is being compiled on April 12, the June contract is trading $1.57 above yesterday’s close and has made a new high for the move of 44.72, which is the highest print since 44.82 made December 4, 2015. We have no recommendation.

Gasoline: On April 12, May and June gasoline will generate a short-term buy signals, which reverses the April 5 short-term sell signals. Both contracts remain on intermediate term buy signals.

Gold: June gold will generate a short-term buy signal on April 12, which reverses the short-term sell signal generated on March 24. The June contract remains on an intermediate term buy signal.

June gold advanced by $14.20 on volume of 179,663 contracts. Total open interest increased by a massive 14,345 contracts, which relative to volume is approximately 220% above average meaning aggressive new buyers were entering the market in large numbers and driving prices to a new recent high for the move of 1260.90. Although, we have not been reporting on gold regularly, total open interest action has been consistently bullish: it increases on price advances and declines when prices fall.

As this report is being compiled on April 12, the June contract is trading $2.20 higher and has made a daily high of 1264.70, which is the highest print since 1267.70 made on March 18. As clients know, we have been reluctant to recommend bullish positions because of the substantial net long position of managed money and the June contract has been on a short-term sell signal. Now that it is on a short and intermediate term buy signal, and we have seen the extent of the downside, we believe when the equity market rolls over as we expect, gold will make new contract highs. Our recommendation is to buy corrections.

Silver: May and July New York silver will generate short-term buy signals on April 12, which reverses the April 4 short-term sell signals. Both contracts remain on intermediate term buy signals.

May silver advanced by 59.2 cents on heavy volume of 89,914 contracts. Total open interest increased by 4,750, which relative to volume is approximately 110% above average meaning aggressive new buyers were entering the market in large numbers and driving prices to a new high for the move of 15.985.

As this report is being compiled on April 12, the May contract has made a new high for the move of 16.230, which is the highest print since 16.370 made the week of October 26, 2015. As of today, the three precious metals: gold, platinum and silver are on short and intermediate term buy signals. Once the equity market begins its descent, we think all three will make new contract highs. Silver is extremely volatile and we recommend utilizing options instead of futures.

British pound:

The June British pound advanced 1.21 cents on volume of 89,728 contracts. Total open interest declined by 2,296 contracts, which relative to volume is average. Yesterday, the June contract made a high of 1.4289 and in the overnight session, it made another new high of 1.4351 and is currently trading approximately 100 pips below the high.

Total open interest continues to act in a consistent bearish fashion: it declines on price advances and increases on price declines.We continue to advise a stand aside posture and as we said in yesterday’s report, expect sporadic rallies, which will be propelled by the large contingent of short-sellers.

Canadian dollar:

The June Canadian dollar advanced 60 pips on volume of 60,452 contracts. Total open interest increased by 972 contracts, which relative to volume is approximately 35% below average. As this report is being compiled on April 12, the June contract is trading sharply higher and is making new contract highs, up 70 pips with a daily high of 78.36, which is the highest print since 78.81 made during the week of July 13, 2015. On April 8, OIA announced that the AUD/CAD cross generated a short-term sell signal and this pair continues to decline. According to the recent COT report leveraged funds remain net short.

From the April 8 note on the Canadian dollar:

“Our position has been that the Canadian dollar will top only after leverage funds assume a net long position. The “wrong-way, Corrigans” of the futures markets are a reliable predictor of market tops and bottoms.”

Australian dollar:

The June Australian dollar advanced 55 pips on volume of 86,430 contracts. Total open interest increased by a substantial 2,795 contracts, which relative to volume is approximately 10% above average. As this report is being compiled on April 12, the June contract is trading 61 pips higher versus the Canadian dollar trading 75 pips above yesterday’s close.

In summary, the Canadian dollar continues to strengthen against the Australian dollar, yet total open interest for the past two days show that market participants are piling into the Australian dollar in large numbers compared to the Canadian dollar. In trading on April 8, the Australian dollar advanced 49 pips and total open interest increased by 1,326 contracts whereas the Canadian dollar for the June contract gained 96 pips and total open interest increased only 873.

From the April 8 note on the Australian dollar:

“According to Friday’s COT report, leverage funds are long the Australian dollar by ratio 3.89:1, which is up substantially from the previous week of 2.56:1 and the ratio two weeks ago of 2.29:1. It is ironic that AUD/CAD cross generated a short-term sell signal on April 8. In other words, leverage funds are substantially long the weaker currency (aussie) and short the stronger (loonie).”