Bloomberg Access:{OIAR<GO>}

WTI crude oil:

January WTI crude oil advanced $1.07 on heavy volume of 1,664,588 contracts. Total open interest increased by 9,564 contracts, which relative to volume is approximately 70% below average. The January contract accounted for a loss of 60,810, which means there was more than enough open interest increases in the forward months to offset the decline in January and increase total open interest.

Yesterday’s action was positive. As this report is being compiled on December 9, the January contract is trading 58 cents above yesterday’s close and has made a daily high of 51.66, which takes out yesterday’s print of 50.98 and is the highest since 51.60 made on December 6. It appears that the path of least resistance is higher and as we said in yesterday’s report, prices were not likely to correct to the 20 day moving average of 47.59 any time soon. Please call for recommendations regarding crude oil.

Natural gas:

January natural gas advanced 9.2 cents on strong volume of 647,731 contracts. Volume declined from December 7 when the January contract lost 3.2 cents on volume of 740,427 contracts and total open interest increased by 7,015, while the January contract lost 22,338. On December 8, total open interest increased by a strong 15,140 contracts, which relative to volume is approximately 10% below average, but the January contract lost 17,612, which means there was more than enough open interest increases in the forward months to offset the decline in January and increase total open interest.

As this report is being compiled on December 9, the January contract is trading nearly unchanged, but has made a new 52-week high 3.777, which is 4.00 cents above yesterday’s high of 3.730 and the previous 52 week high of 3.748. The market is massively overbought, and if long from lower levels, clients should be booking profits and not pressing the long side. Do NOT enter new long positions at current levels and do NOT short this market.

Euro:

The December euro loss 1.46 cents on strong volume of 390,913 contracts. Total open interest increased just 65 contracts. This was due to the December contract losing 12,011 of open interest while the March contract gained enough open interest to slightly offset the loss in December. Yesterday, the December contract made a high of 1.0878, which is the highest print since 1.0856 made on November 14.

As this report is being compiled on December 9, the euro is trading 66 pips lower and has made a daily low of 1.0533, which is not far from his recent contract low of 1.0510 made on December 5. As we have said in previous reports, we think the euro is headed to parity with the dollar and concerns about the French election in April will continue to keep the currency on the defensive against the dollar. We have no recommendation.

Dollar Index:

The March 2017 dollar index advanced 85.7 points on heavy total volume of 90,520 contracts. Total open interest increased by 337 contracts, which relative to volume is approximately 85% below average. The December contract lost 5,524 of open interest, which means there was sufficient open interest increases in the forward months to offset the decline in December and increase total open interest slightly.

As this report is being compiled on December 9, the March contract is trading 42 points above yesterday’s close. As we said in yesterday’s report, for the March contract to continue its advance, it must make a daily low above OIA’s key pivot, which for December 9 is 101.129. We have no recommendation.

10 Year Treasury Note:

The March 10 year treasury note lost 9 points on volume of 1,397,927 contracts. Total open interest increased by 21,556 contracts, which relative to volume is approximately 40% below average. Open interest action in the treasury note has been very bearish of late. On December 7, the March contract gained 11 points on very low volume of 873,109 contracts and total open interest declined by 1,444. On December 2 when the 10 year note gained 15.5 points on volume of 1,495,720, total open interest declined by 49,559.

The pattern of negative open interest action on advances and declines confirms the downtrend in the note 10 year note. As this report is being compiled on December 9, the March contract is trading lower again, down 16.5 points and has made a daily low of 123-280, which is above the contract low of 123-190 made a several of days ago. The market continues to be massively oversold and  where the bottom is for a sustained counter trend rally is difficult to ascertain. The Federal Reserve meets next week and the announcement and conference call is is sure to be a major market mover. Do NOT enter new positions prior to the meeting. We recommend booking profits prior to the to the Fed’s announcement.