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WTI crude oil: On April 12, May and June WTI crude oil generated short-term buy signals, and remain on intermediate term buy signals.

May WTI crude oil advanced $1.81 on huge volume of 1,652,001 contracts. It appears that another record was broken for volume and yesterday’s trading activity took out the previous high of 1,613,844 contracts made on April 8 when the May contract gained $2.46 and total open interest increased by 166 contracts.

On April 12, total open interest increased by 28,856 contracts, which relative to volume is approximately 25% below average. However, the May contract lost 52,262 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in May and increase total open interest. As this report is being compiled after the release of the EIA storage report, the May contract has made a daily high of 42.42, which is 7 cents below the high for the move of 42.49 made on March 18.

Despite the large build of inventories in today’s EIA report, the market continues to trade in a very firm manner even despite the strong dollar on April 13. Now that WTI is on a short term buy signal, the market should have a pullback that lasts from 1-3 days and this would be the opportunity to initiate bullish positions if you are so inclined.

One caveat: there is going to be a meeting of OPEC producers in Doha, Qatar on April 17 and though there is unlikely to be a major announcement on the bullish front, the market will probably trade firmly going into the meeting. Regardless of your views on crude, clients should be flat before the meeting.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 6.6 million barrels from the previous week. At 536.5 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories decreased by 4.2 million barrels last week, but are well above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories increased by 0.5 million barrels last week and are well above the upper limit of the average range for this time of year. Propane/propylene inventories rose 2.8 million barrels last week and are above the upper limit of the average range. Total commercial petroleum inventories increased by 6.9 million barrels last week.

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

May gasoline advanced 2.66 cents on volume of 175,721 contracts. Total open interest increased by a disappointing 264 contracts. The May contract lost 7,294 of open interest, which means there were enough open interest increases in the forward months to offset the decline in May and increase total open interest slightly.

Yesterday’s action was unimpressive despite the May contract making a new high for the move of 1.5386, the highest price of 2016. Despite the new high for the move in WTI on April 13, the May gasoline contract has not taken out yesterday’s print. We have no recommendation.

Heating oil: May and June heating oil will generate short-term buy signals on April 13, which reverses the April 4 short-term sell signals. Both contracts remain on intermediate term buy signals. As this report is being compiled on April 13, the May heating oil contract has made a new high for the move of 1.2907, which is the highest print of 2016.

Lean hogs: June and July lean hogs will generate an intermediate term sell signal on April 13 after generating short term sell signals on April 1. As this report is being compiled on April 13, the June contract is trading 1.425 cents below yesterday’s close. Rallies should be sold.

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

June gold advanced $2.90 on volume of 169,882 contracts. Total open interest increased by a massive 6,334 contracts, which relative to volume is approximately 25% above average meaning aggressive new buyers were entering the market in substantial numbers and driving prices to a high of 1264.70, which is the highest print since 1267.70 made on March 18.

As this report is being compiled on April 13 the June contract is trading $12.80 lower and has made a daily low of 1241.40, which is the lowest print since 1241.60 made on April 11. The dollar is trading sharply higher, therefore a pullback in gold is normal. This combined with yesterday’s short-term buy signal yesterday increases the likelihood of a correction for another day or two.

However, volume is very light on today’s pullback, which is a definite positive. On the negative side: the very large net long position of managed money, which makes us nervous. According to the latest COT report released last Friday, managed money was long gold by ratio of 5.50:1, although this was down from the high ratio for 2016 of 6.15:1 made the previous week. Gold should be traded from the long side.

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

May silver advanced 24.6 cents on heavy volume of 94,661 contracts. Volume exceeded that of April 11 when the May contract gained 59.2 cents on volume of 89,914 contracts and total open interest increased by 4,750. On April 12, total open interest increased substantially again, this time by 4,742 contracts, which relative to volume is approximately 100% above average meaning aggressive new buyers were entering the market in large numbers and driving prices to a multi-month high of $16.230.

As this report is being compiled on April 13, the May contract is trading 8.8 cents above yesterday’s close and has made a new high for the move of $16.345, the highest print since the week of October 26, 2015 (16.370). Silver should be traded from the long side, but we recommend utilizing options instead of futures due to high volatility.

Yen:

The June yen lost 52 pips on light volume of 104,584 contracts. Total open interest increased by a massive 6,234 contracts, which relative to volume is approximately 140% above average meaning aggressive new short-sellers were entering the market in large numbers and driving prices to a new low for the move of .9207.

Considering the large number of new buyers that had been entering the yen as it rallied, it was rather surprising to see the massive open interest increase on yesterday’s decline. This means there are large numbers of longs who have yet to liquidate and who will pressure the yen if it continues to move lower. According to the latest COT report, leverage funds are long the yen by a ratio of 1.98:1, although this is down from 2.39:1 the previous week and 2.67:1 the ratio of two weeks ago.

As this report is being compiled on April 13, the June contract is trading 62 pips lower and has made a daily low of .9154, which is the lowest print since .9115 made on April 7. The June yen remains on short and intermediate term buy signals, and after the market has corrected the massive move of the past two weeks, we think it will rebound and test the April 11 high of .9308. We have no recommendation.

Canadian dollar:

The June Canadian dollar advanced by a strong 84 pips on volume of 83,313 contracts. Volume increased substantially from April 11 when the June contract gained 60 pips on volume of 60,452 contracts and total open interest increased by 972. On April 12, total open interest increased by a sizable 1,849 contracts, which relative to volume is approximately 10% below average, but yesterday’s total open interest increase was the largest seen during the past couple of days. Yesterday, the June contract made a new contract high of 78.44, which is the highest print since the week of July 13, 2015 (78.81).

As this report is being compiled on April 13, the June contract is trading 36 pips lower and has taken out yesterday’s high by 4 pips (78.48).   The AUD/CAD cross has made a new low for the move on April 13 of .9751, which is the lowest print since .9778 made on March 3. On April 8, OIA announced that AUD/CAD generated a short-term sell signal and it remains on an intermediate term sell signal. We have no recommendation.