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Currency futures:

We will not be providing reports on currency futures (except buy signals) from yesterday due to March contract expiration for currency futures. Yesterday’s total open interest reflected March’s expiration and switching into the June contract.

WTI crude oil:

April WTI crude oil advanced $1.14 on volume of 1,524,737 contracts. Volume declined from March 14 when the April contract lost 68 cents on volume of 1,785,814 contracts and total open interest increased by a bearish 45,135. On March 15, total open interest declined by 35,534 contracts, which relative to volume is approximately 5% below average.

The total open interest decline on yesterday’s advance confirms that market participants were liquidating as prices made a high of $49.04. The April contract, lost 52,810 of open interest, which means there were insufficient open interest increases in the forward months to increase total open interest. Yesterday’s action confirms the likelihood that market participants who were showing losses were using the rally to trim positions.

On March 8, OIA announced that April and May WTI crude oil generated short and intermediate term sell signals. Yesterday, was the first rally day since the generation of the signals and as this report is being compiled on March 16, the April contract is trading 16 cents lower after making a new high for the move of 49.62, which is the highest print since $50.11 made on March 10. We think prices are headed lower, but do not have a recommendation to make at this juncture.

Dollar index: The June dollar index will generate short and intermediate term sell signals on March 16.

The June dollar index lost 99.9 points on strong volume of 48,089 contracts. Though volume was relatively strong, total open interest increased only 943 contracts, which relative to volume is approximately 20% below average. This is surprising in two respects: first, the move on the downside was powerful and therefore the increase should have been larger and second, managed money is heavily long the dollar index meaning there should have been liquidation.

The COT report, which was released last Friday revealed that leveraged funds were long the dollar index by a ratio of 4.09:1, though this was down from the previous week of 5.31:1 and the ratio two weeks ago of 5.43:1. Still, there is much more liquidation to come in the dollar index based upon yesterday’s action.

From the March 10 research note on the dollar index:

“The June contract is getting close to generating short and intermediate term sell signals. A short term sell signal will occur if the daily high is below OIA’s key pivot point for March 13 of 100.949. An intermediate term sell signal will occur if the daily high is below OIA’s key pivot point for March 13 of 101.001.”

“With the heavy long position held by leverage funds, this group will pressure the dollar index as they liquidate. Additionally, it appears likely the June euro will generate a short term buy signal on March 13. This will further depress the dollar index as the euro advances.”

“On February 8, we recommended the initiation of long positions in the dollar index ETF UUP. We recommend that this modestly profitable position the liquidated immediately because sell signals in the dollar index appear likely.”

Euro: The June euro will generate an intermediate term buy signal on March 16 after generating a short term buy signal on March 13.

Australian dollar: The June Australian dollar will generate a short term buy signal on March 16 provided the daily low remains above OIA’s key pivot point for March 16 of  76.47.

10 Year Treasury note:

The June 10 year note advanced 27.5 points on volume of 1,569,835 contracts. Total open interest declined by 38,092 contracts, which relative to volume is average. Yesterday’s open interest action confirms that market participants were liquidating on the very strong rally after the announcement by the Federal Reserve to raise interest rates by a quarter of a point.

Despite the sharp move higher, the June contract remains on short and intermediate term sell signals. As this report is being compiled on March 16, the June contract has made a daily high of 123-280, which is slightly above yesterday’s print of 123-260 and is trading 5 points lower on the day and has made a daily low of 123-145, which is not far away from the low for the move of 122-215 made on March 13. We have no recommendation.