Bloomberg Access:{OIAR<GO>}

WTI crude oil:

March WTI crude oil advanced 43 cents on volume of 987,294 contracts. Volume increased from January 23 when the March contract lost 47 cents on volume of 769,999 contracts and total open interest increased by 8,236. On January 24, total open interest declined by 5,137 contracts, which relative to volume is approximately 75% below average, however, a total open interest decline on yesterday’s advance is negative. For the past several days beginning on January 19, crude oil has experienced negative open interest action on advances and declines. Despite this, the March contract remains on short and intermediate term buy signals.

As this report is being compiled on January 25, the March contract is trading close to unchanged after making a daily high of $53.47, which is below yesterday’s print of 53.56 and is equal to the January 23 print of 53.47. For the March contract to resume its advance it must make a daily low above OIA’s pivot point for January 25 of 53.66 and will generate a short term sell signal if the daily high is below OIA’s key pivot point for January 25 of 52.33. Stand aside.

The Energy Information Administration announced on January 25 that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.8 million barrels from the previous week. At 488.3 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 6.8 million barrels last week, and are above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories remained virtually unchanged last week and are above the upper limit of the average range for this time of year. Propane/propylene inventories fell 4.0 million barrels last week but are in the upper half of the average range. Total commercial petroleum inventories increased by 8.9 million barrels last week.

Gasoline: On January 24, March and April gasoline generated short term sell signals, but remain on intermediate term buy signals.

10 Year Treasury Note:

The March 10 year treasury note lost 19 points on volume of 1,170,509 contracts. Total open interest increased by 5,006 contracts, which relative to volume is approximately 75% below average, but a total open interest increase on yesterday’s decline indicates that new short-sellers were entering the market, though this was occurring at a relatively low rate.

For the past couple of days several days beginning on January 18, total open interest increases and declines have been negative for treasury note prices. As this report is being compiled on January 25, the March contract is trading 13 points lower and has made a daily low of 123-245, which is the lowest print since 123-275 made on January 4.

The March contract is getting close to generating a short term sell signal and this will occur if the daily high is below OIA’s key pivot point for January 25 of 124-000. On January 5, the March treasury note generated a short term buy signal and continues to be on an intermediate term sell signal. We have no recommendation.

Dollar index:

The March dollar index advanced 20.9 points on volume of 29,756 contracts. Total open interest declined by 901 contracts, which relative to volume is approximately 10% above average. Yesterday, the March contract made a high of 100.395 and this again is the high on January 25. As a consequence, the March contract will NOT generate an intermediate term sell signal on January 25 because the high is above OIA’s key pivot point for January 25 of 100.344. The March contract generated a short term sell signal on January 12. 

As we pointed out in previous reports, there are large numbers of speculative longs in this market, which means prices are vulnerable from here. Although, we are bullish on the dollar index in the intermediate term, it could experience near-term pressure because the new administration appears to want a weak dollar. Though jawboning by the administration may talk the dollar down for a while, the fundamentals likely dictate a test of the high made January 3 on of 103.815. We have no recommendation.

British pound: The March British pound will generate an intermediate term buy signal on January 25 after generating a short term buy signal on January 23.

S&P 500 E-mini:

The March S&P 500 E-mini advanced 12.50 points on volume of 1,275,904 contracts. Total open interest increased by 26,960 contracts, which relative to volume is approximately 20% below average, but a total open interest increase on yesterday’s advance is positive. Yesterday, the March contract made a new all-time high of 2280.50 and this has been taken out on January 25 of another new print of 2292.75.

In yesterday’s report, we said for the rally to resume, the March contract would have to make a daily low above our pivot point of 2267.77 and the low thus far on January 25 has been 2274.75, substantially above the pivot point. For recommendations on how to trade the E-mini, please call or email.