WTI crude oil:
February WTI advanced $1.43 on heavy volume of 1,645,958 contracts. Volume traded yesterday was the highest since December 14 when crude oil lost 1.94 on volume of 1,561,353 contracts and total open interest increased by 5,239. On January 11, total open interest increased by a substantial 43,174 contracts, which relative to volume is average. The February contract lost 46,260 of open interest, which means there was more than enough open interest increases in the forward months to offset the decline in February and increase total open interest. Yesterday’s performance was outstanding.
As this report is being compiled on January 12, the February contract is trading 68 cents above yesterday’s close and has made a new high for the move of 53.50, which is the highest print since January 9 (53.83). For the rally to continue, the February contract must make a daily low above OIA’s pivot point of $53.56. We have no recommendation at this juncture.
Dollar index: The March dollar index will generate a short term sell signal on January 12, but remain on an intermediate term buy signal.
The March dollar index lost 24.9 points on heavy volume of 74,994 contracts. Total open interest declined by a massive 2,727 contracts, which relative to volume is approximately 25% above average. This is heavy liquidation considering the decline was rather moderate.
As this report is being compiled on January 12, the March contract is trading 66.2 points lower on the day and has made a daily low of 100.700, which is the lowest print since 100.635 made on December 14. The 50 day moving average stands at 101.072 and the March contract is trading below it.
The next major area of support is the December 8 low of 99.25, which is below OIA’s key pivot point for an intermediate term sell signal (99.969) and then the 100 day moving average of 98.712. Both the Japanese yen and euro will generate a short term buy signals on January 12 and if they continue to advance as we expect, this will bring substantial pressure to the dollar index. Stand aside.
Euro: The March euro will generate a short term buy signal on January 12, but remains on an intermediate term sell signal.
The March euro advanced 17 pips on volume of 313,274 contracts. Total open interest increased by 2,195 contracts, which relative to volume is approximately 55% below average, but a total open interest increase on yesterday’s advance is positive. The open interest increase in yesterday’s trading indicates that short-sellers are not capitulating even though prices are nearly 3.00 cents above the contract low made only several days ago.
The COT report, which was released last Friday revealed that short-sellers are in abundance in euro futures. As of the latest report, leverage funds are short by ratio of 4.00:1, which is up from the previous week 3.58:1 and the ratio two weeks ago of 3.83:1.
As this report is being compiled on January 12, the March contract is trading 60 pips higher on the day and has made a new high for the move of 1.0710, which is the highest print since 1.0693 made on December 30. Although it is difficult to determine how far the current rally will carry, we recommend a stand aside posture until substantial numbers of short-sellers have been blown out. We think price will turn lower as the French election approaches.
Yen: The March Japanese yen will generate a short term buy signal on January 12, but remains on an intermediate term sell signal.
The March Japanese yen advanced 24 pips on volume of 281,983 contracts. Total open interest declined by 894 contracts, which relative to volume is approximately 85% below average. Speculators are heavily short the yen and according to last week’s COT report they were short by a ratio of 3.70:1, up from the previous week of 3.13:1 and more than double the ratio two weeks ago of 1.55:1. Similar to the euro, the yen should continue to advance until a sufficient number short-sellers have been blown out. Stand aside.
Copper: On January 11, March New York copper generated a short term buy signal and remains on an intermediate term buy signal. For anyone trading copper, we recommend using the copper ETF, ticker symbol JJC.