Bloomberg Access:

WTI crude oil:

August WTI crude oil lost 54 cents on light volume of 981,286 contracts. Total open interest declined by 21,132 contracts, which relative to volume is approximately 10% below average. The July contract accounted for a loss of 45,921 of open interest.

The COT report, which was released last Friday revealed that managed money added 9,035 to their long positions and also added 41,998 contracts to their short positions. Commercial interests liquidated 2,780 of their long positions and also liquidated 11,097 of their short positions. As of the June 13 tabulation date, managed money was long WTI crude oil by ratio of 2.14:1, down sharply from the previous week of 2.89:1 and the ratio two weeks ago of 2.77:1.

As this report is being compiled on June 20, the August contract has broken down to a new low of $42.94, which is the lowest print since 42.20 made the week of November 14, 2016. We have been warning clients there was a reason to be involved in crude oil.

From the June 7 note on WTI crude:

“As high as volume was, the total open interest increase was low with a gain of just 5,063 contracts. The July contract lost 40,124 and this means there were enough open interest increases in the forward months to offset the decline in July, but just barely.”

“The very minor increase of total open interest tells us that short-sellers were reluctant to enter new positions at the lower end of the trading range. Additionally, total open interest didn’t decline, which tells us that those holding long positions are digging in and refusing to liquidate even as prices have moved close to a one month low.”

“As this report is being compiled on June 8, the July contract is trading close to unchanged on the day, but has made another new low for the move of 45.20, which takes out yesterday’s print of 45.65. As we indicated in previous notes, the July contract is headed to a test of the May 5 low of 44.13.”

“On June 2, OIA announced that July WTI crude oil generated a short term sell signal and was already been on an intermediate term sell signal. Stand aside.”

Dollar Index: The September dollar index will generate a short term buy signal on June 20, but remains on an intermediate term sell signal.

The September dollar index advanced 39.8 points on volume of 19,507 contracts. Total open interest increased by 257 contracts, which relative to volume is approximately 45% below average.

The COT report released last Friday revealed that leverage funds added 3,393 to their long positions and liquidated 1,579 of their short positions. As of the June 13 tabulation date, leverage funds were long the dollar index by ratio 2.40:1, up from the previous week of 2.04:1 and the ratio two weeks ago 2.24:1. Stand aside.

Euro: The September euro will generate a short term sell signal on June 20, but remains on an intermediate term buy signal.

The September euro lost 45 pips in yesterday’s trading on volume of 148,376 contracts. Total open interest declined by 9,028 contracts, which relative to volume is approximately 140% above average, but this was due to the final liquidation of the June 2017 contract.

As this report is being compiled June 20, the September contract is trading 23 pips lower on the day and has made a new low for the move of 1.1173, which is the lowest print since 1.1175 made on May 30.

As we pointed out in previous research notes, longer-term we like the euro, but  look for a continued pullback to the 50 day moving average of 1.1018, which would be a reasonable level to begin to contemplate bullish positions. Fund flows to Europe are increasing and the economy of the continent is gaining strength. At this juncture, we recommend a stand aside posture.

From the June 15 note on the euro:

“Total open  increased by a sizable 11,169 contracts, which relative to volume is approximately 10% above average. This means that new short-sellers were moving into the euro and driving it to a low of 1.1187, the lowest print since 1.1175 made on May 30.”

“As this report is compiled on June 16, the euro is trading 40 pips above yesterday’s close and has not taken out yesterday’s low. We look for more corrective action in the euro, but longer-term really like the long side of this currency.”

Yen: The September yen will generate an intermediate term sell signal provided the daily high does not exceed OIA’s key pivot point for June 20 of .9019. The high thus far in trading is .9019 and we are calling the intermediate term sell signal (though the daily high is not below the pivot) because on June 15 the September contract generated a short term sell signal. We have no recommendation.

Gold: August 2017 New York gold will generate an intermediate term sell signal on June 20 after generating a short term sell signal on June 15.

August gold lost $9.80 on volume of 190,300 contracts. Total open interest declined by 10,406 contracts, which relative to volume is approximately 120% above average, which means that liquidation was extremely heavy on yesterday’s decline.

The COT report released on Friday revealed that managed money liquidated 14,521 of their long positions and added 4,032 to their short positions. Commercial interests liquidated 1,672 of their long positions and also liquidated 9,411 of their short positions. As of the June 13 tabulation date, managed money was long New York gold by ratio of 3.19:1, down from the previous week of 3.62:1 and the ratio two weeks ago 3.43:1.

In previous notes on gold we expressed concern about the likelihood of a buy signal in the dollar index caused primarily by the falling euro, which is negative for gold and precious metal prices. This scenario has come to pass and more weakness is ahead.

As this report is being compiled on June 20, the August contract is trading $3.10 lower and has made a daily low of 1242.40, which is the lowest print for the August contract since 1240.00 made on May 17. While we like gold longer-term, the market is loaded with speculative longs. Once managed money substantially reduces their long positions, prices should find support at 1215.00, which is the 100 week moving average on the weekly continuation chart.