WTI crude oil: On April 5, May and June 2017 WTI crude oil generated short term buy signals, but remain on intermediate term sell signals.
May WTI crude oil gained 12 cents on April 5 on volume of 1,230,222 contracts. Total open interest declined by 12,143 contracts, which relative to volume is approximately 50% below average. The May contract lost 34,685 of open interest, which means there were insufficient open interest increases in the forward months to offset the decline in May.
Yesterday’s total open interest action was a disappointment and follows the dismal open interest action on April 4 when the May contract gained 79 cents and total open interest increased just 809 contracts, a figure that is dramatically below average. On March 31, the May contract gained 25 cents and total open interest increased just 3,777 contracts, another disappointing number.
In summary, from March 31 through April 5, a total of four trading sessions, the May contract gained 80 cents, yet total open interest in this time frame has declined by 23,791 contracts. This is bearish open interest action, and tempers our enthusiasm for the upside. However, we think the strength will come from the products and as clients know, we are bullish on gasoline and continue to recommend bullish positions for gasoline and the gasoline ETF UGA.
As this report is being compiled on April 6, the May contract is trading 57 cents higher or +1.11% on low volume, which again confirms the lackluster nature of the advance. Thus far in trading, May has made a daily high of 51.77, which is below yesterday’s print of 51.88, which was the highest price since 53.43 made on March 8.
Natural gas: On April 5, May and June 2017 New York natural gas generated intermediate term buy signals after generating short term buy signals on March 10.
May natural gas lost 2.7 cents on volume of 430,663 contracts. Total open interest increased by 4,608 contracts, which relative to volume is approximately 50% below average. The May contract accounted for a loss of 10,301 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 on April 6, the May contract is trading 4.8 cents higher on the day and has made a daily high of 3.337, which is below yesterday’s print of 3.347. In yesterday’s research note, we recommended that clients take partial profits and have exit points in place for the remainder of their positions.
May New York copper gained 6.80 cents on heavy volume of 130,357 contracts. Total open interest increased by a sizable 4,259 contracts, which relative to volume is approximately 25% above average, which means that new buyers were moving strongly into New York copper futures and sending prices to a high of 2.6950, which is the highest print since $2.7170 made on March 30.
The May contract is getting close to generating a short term buy signal and is already on an intermediate term buy signal. The short term buy signal will occur if the daily low is above OIA’s key pivot point for April 6 of $2.6644. The moving average setup is bullish with the 50 day moving average standing at 2.6766, 100 day, 2.6334, 200 day 2.4133.
Copper should be traded from the long side once the short term buy signal is generated. For clients who prefer to trade copper via equities, after copper futures have generated a short term buy signal, the copper ETF JJC may be used for trading purposes.
Australian dollar: On April 5, the June Australian dollar generated a short term sell signal and remains on an intermediate term buy signal, although it is getting close to generating an intermediate term sell signal.
The June Australian dollar gained 23 pips on volume of 79,841 contracts. Total open interest declined by massive 4,042 contracts, which relative to volume is approximately 105% above average, which means that large numbers of market participants were liquidating as the Australian dollar had a minor bounce in yesterday’s trading.
Yesterday’s negative open interest action followed that of April 4 when the June contract lost 40 pips and total open interest increased by 972 contracts, which indicated that short-sellers were piling in.
As this report is being compiled on April 6, the Australian dollar has turned lower and is trading 39 pips lower on the day and has made a daily low of 75.22, which is the lowest print since 75.26 made on March 14.
In yesterday’s report we said, clients should wait for a rally before initiating bearish positions. The Chinese president is meeting with the U.S. president and some favorable news for China could give the Australian dollar a bid, at least temporarily.
AUD/CAD: Aussie/Cad is getting close to generating a short term sell signal and this will occur if the daily high is below OIA’s key pivot point for April 6 of 1.017.
June British pound advanced 36 pips on volume of 96,820 contracts. Total open interest increased by 1,784 contracts, which relative to volume is 25% below average. However, yesterday’s total open interest increase indicates that new buyers were pushing the June contract higher. Bullish open interest action relative to price advances and declines has been in evidence for the past couple of days.
For example, on March 31, the June pound advanced 54 pips and total open interest increased by 1,334. In other words, short covering is not powering the pound higher and this indicates that short-sellers are digging in and refusing to liquidate. Ultimately, this will send the pound higher in our opinion.
On March 27, the June pound made its recent high for the move of 1.2643 and since then has been consolidating. Although we think the resolution of the consolidation will be higher, we cannot dismiss the likelihood of a test of the March 29 low of 1.2402. On March 22, OIA announced the June pound generated short and intermediate term buy signals. The June contract is quite a distance from reversing these. No recommendation.
S&P 500 E-mini:
June S&P 500 E-mini lost 10.00 points on heavy volume of 1,941,905 contracts. Surprisingly, total open interest declined just 3,084, a minuscule number and which indicates that market participants were not panicking after the E-mini reversed when the Federal Reserve released its minutes of its March meeting at 2:00 Eastern daylight time.
As we pointed out in yesterday’s report, for the rally to continue, the short term sell signal would have to be reversed and obviously this did not occur in yesterday’s trading and will not occur on April 6. For the rally to resume again in earnest, and for the June S&P 500 E-mini contract to generate a short term buy signal, the low of the day must be above OIA’s key pivot point for April 6 of 2366.92. The low thus far in trading on April 6 has been 2338.00 and the high for the day thus far has been 2361.25. We have no recommendation,