Bloomberg Access:{OIAR<GO>}

Natural gas:

March natural gas lost 3.9 cents on volume of 475,533 contracts. Total open interest increased for the third day in a row, this time by 7,731 contracts, which relative to volume is approximately 35% below average. The March contract accounted for a loss of 16,031 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in March and increase total open interest.

During the past three days, March natural gas has fallen 23.6 cents and total open interest has increased by cumulative 64,256 contracts. As we mentioned in yesterday’s report, we suspect that a hefty portion of new short-sellers are commercial interests and the coming COT report will provide us with more information. On January 4, OIA announced that March natural gas generated short and intermediate term sell signals and we continue to recommend a stand aside posture.

Dollar index: The March dollar index will generate a short term buy signal on February 15. It remains on an intermediate term sell signal.

The March dollar index advanced 28.3 points on volume of 38,538 contracts. Total open interest increased by 698 contracts, which relative to volume is approximately 25% below average, but a total open interest increase on yesterday’s advance is positive. As this report is being compiled on February 15, the March contract has made a new high for the move of 101.750, which is the highest print since 101.770 made on January 12.

There are a number of fundamental factors, which we think will aid the dollar index’s rise and two prominent ones is that inflation appears to be picking up and that interest rate increases are on the table for this year. Additionally, with talks of corporate and personal tax cuts along with a potential infrastructure program, we think the dollar index will go on to make new contract highs in the weeks and months ahead. We advised long positions in the dollar index ETF UUP in the February 8 research note, Continue to hold.

Yen: March Japanese yen will not generate a short term sell signal on February 15. For the short term sell signal to occur the high of the day must be below OIA’s key pivot point for February 15 of .8772.

March yen lost 43 pips on volume of 156,102 contracts. Total open interest increased by 2,326 contracts, which relative to volume is approximately 40% below average, but a total open interest increase on yesterday’s decline indicates that short-sellers were in control and moving prices to a new low for the move of .8739. As this report is being compiled on February 15, the March contract is trading 6 pips below yesterday’s close and has taken out yesterday’s print with another new low of .8704. A short term sell signal in the yen appears inevitable. We have no recommendation.

Mexican peso:

The March Mexican peso advanced 12 pips on volume of 35,264 contracts. Total open interest increased by 960 contracts, which relative to volume is  average. Yesterday, the March contract made a new high for the move of .04929, which is the highest print since December 12. (.04961).

As this report is being compiled on February 15, the March contract is trading nearly unchanged and has not taken out yesterday’s high. In the note on the Mexican peso of January 30, we recommended bullish positions and these should continue to be held. 

10 Year Treasury Note: The March 10 year note will not generate a short term sell signal on February 15 because the daily high is above OIA’s key pivot point of 124-050 for the generation of a short term sell signal.

The March 10 year note lost 11.5 points on volume of 1,618,527 contracts. Total open interest increased by 23,597 contracts, which relative to volume is approximately 40% below average, but a total open interest increase on yesterday’s decline indicates that new short-sellers are piling into the note market and driving prices lower (123-310). The March contract has fallen each day since February 9 and total open interest has increased each day as well.

As this report is being compiled on February 15, the March contract is trading lower again, down 11 points and has made a daily low of 123-245, the lowest print since 123-180 made on January 26. A short term sell signal in the note appears inevitable and it remains on an intermediate term sell signal. We have no recommendation at this juncture.