Bloomberg Access:{OIAR<GO>}

Natural Gas:

January natural gas declined by 10.6 cents on volume of 547,146 contracts. Total open interest declined by 8,313 contracts, which relative to volume is approximately 40% below average. The January contract accounted for a loss of 14,151. Yesterday the January contract made a low of 3.394 and as this report is being compiled on December 16, the January contract has made another new low for the move of $3.343, which is the lowest print since 3.316 made on December 1. Thee January contract will generate a short term sell signal if the daily high is below OIA’s key pivot point for December 16 of 3.265. This is below the 50 day moving average of $3,300.We recommend a stand aside posture. 

Dollar index:

The March dollar index advanced by a very strong 1.283 points on extremely heavy volume of 141,672 contracts. Surprisingly, total open interest declined, this time by 3,380 contracts, which relative to volume is approximately 10% below average. The December contract lost 23,384 of open interest as it approaches expiration, but the problem is there were not enough open interest increases in the forward months to offset the decline in December.

On December 14, the dollar index advanced 63.3 points on volume of 98,534 and again total open interest declined, this time by 4,133. In summary, though the dollar index moved to the highest level yesterday since January 2003, the fact is short sellers covering positions were the impetus to move prices higher, not new buying. Stand aside.

Euro:

The March euro lost 1.34 cents on very heavy volume of 609,477 contracts. Volume increased from December 14 when the euro lost 62 pips on volume of 599,527 contracts and total open interest increased by a massive 14,352. On December 15 total open interest increased by 9,829 contracts, which relative to volume is approximately 35% below average, but yesterday’s total open interest increase indicates that short-sellers were willing to enter new positions at 13 year lows, which was made by the December contract. As this report is being compiled on December 16, the March contract is trading 31 pips above yesterday’s close and has not taken out yesterday’s contract low of 1.0412. Stand aside.

Yen:

The March yen lost 113 pips on volume of 313,456 contracts. Total open interest increased by an astounding 24,947 contracts, which relative to volume is approximately 240% above average meaning there were large numbers of aggressive short-sellers entering the market and driving prices to February 2016 lows. Yesterday’s massive increase of open interest follows the huge increase on December 14 when the yen lost 83 pips on volume of 337,895 contracts and total open interest increased by 33,358. The yen is massively oversold and we recommend a stand aside posture.

10 Year Treasury Note:

The 10 year treasury note lost 15.5 points on volume of 2,100,478 contracts. Total open interest increased by an astounding 85,556 contracts, which relative to volume is approximately 55% above average meaning that new aggressive short-sellers were entering the market in large numbers and driving prices below the April 2014 low 122-225 on the monthly continuation chart. That total open interest increased massively at contract lows is testament to the very strong bearish views of market participants on the future prospects of the 10 year note. The market is massively oversold and has been overdue for a very strong counter trend rally for quite a while. Do NOT enter new bearish positions at current levels.

Copper: March New York copper is getting close to generating a short term sell signal and this will occur when the daily high is below OIA’s key pivot point for December 16 of $2.5706.

Gold:

February 2017 New York gold lost $33.90 on volume of 307,028 contracts. Much to our surprise, total open interest declined by only 313 contracts. We took a look at the stats for the individual contracts and the lead month February 2017 lost only 98 of open interest while April 2017 gained 716. Our conclusion: there was a substantial amount of churn between buyers and sellers, but also that holders of long positions are digging in and refusing to liquidate.

The COT report revealed that managed money liquidated 11,230 contracts of their long positions and added 13,393 to their short positions. Commercial interests liquidated 2,321 of their long positions and also liquidated 9,481 of their short positions. Managed money continues to remain net long and according to last week’s stats, managed money was long by ratio of 2.20:1, though this was down from the previous week of 2.94:1 and the ratio two weeks ago of 3.62:1. In summary, there are large numbers of longs holding losing positions, some with substantial losses. As gold continues its decline, this group will be forced to liquidate. Stand aside.

Silver:

March New York silver lost $1.263 on heavy volume of 110,200 contracts. Total open interest declined by 2,909 contracts, which relative to volume is average. The March contract accounted for a loss of 3,284 and is the lead month for New York silver. Note the difference in total open interest numbers of silver versus gold. The COT report released last Friday revealed that managed money liquidated 803 of their long positions and added 1,264 to their short positions. Commercial interests added 507 to their long positions and also added 198 to their short positions. This left managed money long silver by ratio of 3.60:1, down from the previous week of 3.98:1 and the ratio two weeks ago of 3.76:1. Stand aside.