Bloomberg Access:{OIAR<GO>}

WTI crude oil:

March WTI crude oil advanced $1.10 on volume of 1,050,343 contracts. Total open interest increased only 5,985 contracts, which relative to volume is approximately 75% below average. The February contract lost 19,524 of open interest, which indicates there were sufficient open interest increases in the forward months to offset the decline in February and increase total open interest slightly. Friday’s open interest action left much to be desired.

The COT report released on Friday show that managed money added 49,295 to their long positions and liquidated 15,760 of their short positions. Commercial interests liquidated 1,692 of their long positions and added 8,680 to their short positions. This left managed money long WTI crude oil by a stratospheric 6.13:1, up sharply from the previous week of 4.42:1 and the ratio two weeks ago of 4. 54:1.

As this report is being compiled on January 23, the March contract is trading 47 cents lower on the day after making a daily high of 53.47, which is below Friday’s high of 53.67. Currently, the March contract is trading at $52.72, which is below its 20 day moving average of 53.59, but above the 50 day moving average of 51.87. For the March contract to begin a new leg higher, the low of the day must be above OIA’s pivot point for January 23 of 53.65. A short term sell signal will occur if the daily high is below OIA’s key pivot point for January 23 of 52.29. We recommend a aside posture.

Natural gas:

March natural gas lost 14.9 cents on volume of 418,525 contracts. Total open interest declined by 18,903 contracts, which relative to volume is approximately 75% above average meaning liquidation was extremely heavy on Friday’s major decline. The February contract, which enters first notice stay shortly lost 15,526 of open interest. As this report is being compiled on January 23, the March contract is trading 3.1 cents higher on the day after making a new low for the move of $3.169, which takes the March contract down close to its previous major low of 3.110 made on January 9.

The COT report released on Friday revealed that managed money added 3,520 to their long positions and liquidated 18,279 of their short positions. Commercial interests liquidated 861 of their long positions and also liquidated 3,183 of their short positions. This left managed money long by a substantial 2.69:1, up from the previous week of 2. 23:1 and the same as the ratio two weeks ago of 2.68:1.

This means there are large numbers of speculative longs in the market who are likely showing losses and will be forced to liquidate as prices move lower, which we think will occur over the next couple of weeks. On January 4 March natural gas generated short and intermediate term sell signals. Stand aside.

Dollar index: The March dollar index is getting close to generating an intermediate term sell signal after generating a short term sell signal on January 12. An intermediate term sell signal will occur if the daily high is below OIA’s key pivot point for January 23 of 100.302.

The March dollar index lost 45.4 points on volume of 40,869 contracts. Total open interest declined by 388 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on January 23 the March contract is trading 50.1 points lower on the day.

The COT report released on Friday revealed that leverage funds liquidated 1,049 of their long positions and also liquidated 2,063 of their short positions. Despite the 3 1/2% move lower, leverage funds remain long the dollar index by ratio of 2.63:1, up from the previous week of 2.29:1 and the ratio two weeks ago of 2.24:1.

Although, we are bullish the dollar index in the intermediate term, with the large long position held by managed money as prices move to their lowest level in 45 days, we think there is more on the downside. This is aided in part by strength in the British pound, which will generate a short term buy signal on January 23. Continue to stand aside.

British Pound: The March British pound will generate a short term buy signal on January 23, but remains on an intermediate term sell signal.

Yen:

The March Japanese yen gained 39 pips on volume of 196,443 contracts. Total open interest declined by 3,818 contracts, which relative to volume is approximately 20% below average. As this report is being compiled on January 23, the March contract is rocketing higher, up 89 pips or +1.02% and is the strongest of the currency futures contracts we follow.

The COT report released on Friday revealed that leverage funds remain massively short the yen and according the figures released by the COT, leverage funds added 338 to their long positions and liquidated 4,776 of their short positions. Still, this left leverage funds short yen by a ratio of 2.90:1, down from the previous week of 3.12:1 and substantially lower than the ratio two weeks ago of 3.70:1. On January 12, OIA announced that the March yen generated a short term buy signal, but it currently remains on an intermediate term sell signal. Stand aside.