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Gold:

April gold advanced $14.00 on volume of 202,876 contracts. Total open interest increased by a sizable 11,950 contracts, which relative to volume is approximately 140% above average meaning aggressive new buyers were entering the market and driving prices to a high of 1241.80, which is only slightly above the February 26 print of 1241.30.

As this report is being compiled on March 1, the April contract is trading $4.70 lower and has made a daily low of 1227.70, which is above the February 29 print of 1216.30. On March 1, the April contract has made a high of 1249.30, which occurred when the equity market was trading lower and has since pulled back now that equity has rallied.

This is typical behavior for gold, and though open interest action relative to price advances and declines has been bullish, we continue to reserve our bullish enthusiasm until the 50 day moving average has crossed above the 200 day. On January 7, April gold generated a short-term buy signal and an intermediate term buy signal on January 26.

WTI crude oil:

April WTI crude oil advanced 97 cents on lighter volume of 899,284 contracts. Volume declined substantially from February 26 when the April contract lost 29 cents on volume of 1,133,330 contracts and total open interest declined by 26,021. Additionally, volume was the weakest since February 23 when the April contract lost $1.52 one volume of 897,781 contracts and total open interest increased by 7,570.

On February 29, total open interest increased by a healthy 13,267 contracts, which relative to volume is approximately 40% below average, however an open interest increase on yesterday’s advance is positive. The April contract gained 1,360 of open interest. The April contract closed at $33.75, which is the highest close since 33.86 on February 3. This is positive, because usually sellers come into the market near the close and slam prices lower.

Although, total open interest increase was positive, the tepid volume indicates that potential market participants are sitting on the sidelines as the market rallies. The speculative community remains skeptical of the current rally.

As this report is being compiled on March 1, the April contract is trading 79 cents above yesterday’s close and has made a daily high of 34.76, which takes out yesterday’s print of 33.98 and the February 26 high of 34.69.  Early on it appeared April WTI was going to generate a short-term buy signal on March 1, but made a low of 33.37, which is below OIA’s key pivot point for March 1 of $33.55. In order for the buy signal to be generated, the low of the day must be above the pivot point. It is clear, the pattern of trading in crude oil has changed and we expect a short-term buy signal to be generated this week. At this point, we have no recommendation.

Brent crude oil:

May Brent crude oil gained $1.13 on lackluster volume of 738,618 contracts. However, total open interest increased by 11,153 contracts, which relative to volume is approximately 40% below average, but the April contract accounted for loss of 12,856 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in April and increase total open interest.

As this report is being compiled on March 1, the May contract has made a daily high of 37.25, which is 1 cent below the February 26 print of 37.26. On February 26, the May contract generated a short-term buy signal, and thus far the typical 1-3 day pullback has not occurred. On March 1 the May contract has made a daily low of 35.95, which is substantially above yesterday’s print of 35.08. Most likely, the correction will come from a higher level. Do not chase Brent. Stand aside at this juncture.

Dollar index: On February 29, the March and June dollar index generated short-term buy signals, but remain on intermediate term sell signals.

The March dollar index advanced 4.4 points on volume of 22,142 contracts. Total open interest increased 259 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on March 1, the March contract is trading 22.6 points higher and has made a new high for the move of 98.585, which is the highest print since 98.955 made on February 3. We have no recommendation.

Euro: On February 29, the March and June euro generated short-term sell signals, and the March contract will generate an intermediate term sell signal on March 1.

The March euro lost 46 pips on volume of 202,237 contracts. Total open interest increased by 1,644 contracts, which relative to volume is approximately 60% below average. As this report is being compiled on March 1, the March contract is trading 23 pips lower and has made a new low for the move of 1.0837, which takes out yesterday’s print of 1.0862.

Yesterday, short-sellers were piling into the market, and lower prices are ahead, especially because the head of the European Central Bank will be making an announcement on March 10 about continued quantitative easing, The market is anticipating this and is reacting accordingly. The March contract will generate an intermediate term sell signal on March 1 if the daily high is below OIA’s key pivot point for March 1 of 1.0920. We have no recommendation.

10 Year Treasury Note: The June 10 year treasury note is getting close to generating a short-term sell signal. This will occur if the daily high is below OIA’s key pivot point for March 1 of 129-309.

Canadian dollar:

On February 26, the March and June Canadian dollar generated intermediate term buy signals after generating short term buy signals on February 1. We have advised clients to remain on the sidelines because we think the advance in the Canadian dollar is a bear market rally and will dissipate once a sufficient number of short-sellers have been blown out.

Leverage funds remain massively short the Canadian dollar according to the recent COT report by a ratio of 6.06:1. As this report is being compiled on March 1, the March Canadian dollar is trading 57 pips higher and has made a new high for the move of 74.61, which is the highest print since early December 2015. As we mentioned in yesterday’s report, OIA’s target for the March contract is 75.85 and the advance in crude oil will support. Continue to stand aside.

S&P 500 E-mini:

The March S&P 500 E-mini lost 13.25 points on volume of 1,841,643 contracts. Total open interest increased by 8,856 contracts. As this report is being compiled on March 1, the March contract is trading 38.50 points higher and has made a daily high of 1969.25, which takes out the February 26 print of 1968.75 made in the early morning hours on Friday.

In our February 21 research note, we said the cash S&P 500 would move to its 50 day moving average of 1954.05 and likely rally to the 100 day moving average of 1999.47 if it was able to make a daily low above the pivot point of 1932.60. The low above the pivot point occurred on February 26. Also, we said that the March S&P 500 E-mini would move to its 50 day moving average of 1989.00 if it made a daily low above the pivot point of 1930.75. The March contract made the low above the pivot point on February 26 as well.

This is not to say that a new bull market has arrived, rather we view the current activity is a massive short covering rally, similar to the Canadian dollar after an extended slide. We continue to recommend a stand aside posture and think the March S&P 500 E-mini and the major indices market will begin to struggle once they begin to trade above the median price of their all-time highs and the February lows. For the March contract, this means that trade above 1968 should begin to be a labored affair. Do not enter bearish positions at this juncture.

From the February 21 note:

“On the other hand, the more likely scenario is a move to the 50 day moving average of 1954.05 basis the S&P 500 cash index and 1946.30, the 50 day moving average for the March S&P 500 E-mini. If the S&P 500 cash index can make a daily low above the pivot point of 1932.60, we think the rally can continue to the 100 day moving average of 1999.47. For the March S&P 500 E-mini the pivot point is 1930.75 and the 100 day moving average is 1989.00.”