Bloomberg Access:{OIAR<GO>}

Dollar Index: The March and June dollar index will generate intermediate term buy signals on March 2 after generating short term buy signals on February 15.

The March dollar index advanced 65.1 points on heavy volume of 68,776 contracts. Total open interest exploded higher, up 2,663 contracts, which relative to volume is approximately 75% above average and this indicates that new buyers were entering trades in the dollar index and driving prices higher (101.980).

As this report is being compiled on March 2, the March contract is trading sharply higher again and has made a new high of 102.195, which is the highest print since 102.960 made on January 11. On February 8, we recommended long positions in the dollar index ETF UUP and recommended adding to this position in the February 15 report. Continue to hold the position, and move the sell stop to break even.

From the February 15 research note on the dollar index:

“We recommend waiting another day before initiating bullish positions in futures. Unfortunately, options in the dollar index are illiquid and therefore the spreads are unreasonably wide. Avoid them. If the dollar index pulls back on the 17th, we recommend adding to the ETF UUP. On February 8, we recommended bullish positions and think it is wise to take advantage of pullbacks in the dollar index to add to the existing long position in UUP. For the original position and new additions, sell stops should be slightly below the low for the move of $25.65 made on February 2.”

British pound: On March 1, the March and June British pound generated short and intermediate term sell signals.

The March British pound lost 1.21 cents on volume of 148,993. Total open interest went crazy, increasing by a staggering 17,773 contracts, which relative to volume is approximately 360% above average and this indicates that huge numbers of short-sellers were entering the market and driving prices to a new low for the move of 1.2282.

As this report is being compiled on March 2, the March contract is trading 18 pips lower and has made another new low for the move of 1.2259. Although, the path of least resistance for the pound is lower, we are uncomfortable being in a very crowded bearish trade. Also, now that the pound is on short and intermediate term sell signals, expect a counter trend rally, which could cause a substantial amount of short covering. Stand aside.

Canadian dollar: On March 1, the March and June Canadian dollar generated short and intermediate term sell signals.

The March Canadian dollar lost 36 pips on volume of 87,669 contracts. Total open interest increased by 1,080 contracts, which relative to volume is approximately 45% below average, but the open interest increase indicates that short-sellers were moving into the market and driving prices lower (74.86). This is the second day in a row in which open interest increased on a price decline. On February 28, the March contract lost 79 pips and total open interest increased by 4,119 contracts.

As we pointed out in yesterday’s report, leverage funds remain long the Canadian dollar. As this report is being compiled on March 2, the March contract is trading lower again, down 24 pips and has made a new low for the move of 74.64, which is the lowest print since 74.73 made on January 20. Now that the Canadian dollar is on short and intermediate term sell signals, the market should have a counter trend rally, that lasts from 1-3 days. We have no recommendation.

Yen: The March and June yen will generate short term sell signals on March 2.

March yen lost 118 pips on volume of 245,168 contracts. Total open interest increased by 5,955 contracts, which relative to volume is average, but an open interest increase on yesterday’s price decline confirms that new short-sellers were entering the market and driving prices lower (.8768). As this report is being compiled on March 2, the March contract is trading sharply lower again, down 68 pips and has made a new low for the move of .8729, which is the lowest print since .8704 made on February 15. No recommendation.

WTI crude oil: April WTI crude oil will generate a short term sell signal if the daily high is below OIA’s key pivot point for March 2 of $53.32.

As this report is being compiled on March 2, the April contract is trading $1.07 lower and has made a daily low of 52.67. OIA has warned clients away from the long side of this market due to the fact that managed money is heavily long and will exert considerable selling pressure once the short term sell signal is generated.

Australian Dollar: The March Australian dollar will generate a short term sell signal if the daily high is below OIA’s key pivot point for March 2 of 76.24. The high on March 2 has been 76.80 and low 75.60.

Live cattle: On March 1, April live cattle generated a short term buy signal and remains on an intermediate term buy signal. We have no recommendation.

10 Year U.S. Treasury Note: On March 1, the June 10 Year U.S. Treasury Note generated a short term sell signal and will generate an intermediate term sell signal on March 2.

The June 10 Year U.S. Treasury Note lost a massive 27.5 points on volume of 1,770,315 contracts. Total open interest exploded higher, up 54,300 contracts, which relative to volume is approximately 15% above average as prices moved to a new low for the move of 123-195. As this report is being compiled on March 2, the June contract is trading 11 points lower and has made a new low for the move of 123-110, which is the lowest print since 123-065 made on February 15. No recommendation.