Corn: May corn will generate an intermediate term buy signal on March 22 if the daily low remains above OIA’s key pivot point for March 22 of 3.66 1/4. On March 14, May corn generated a short-term buy signal.
WTI crude oil:
May WTI crude oil advanced 38 cents on very light volume of 818,002 contracts. Volume was the smallest since February 29 when crude oil advanced 97 cents on volume of 899,284 contracts and total open interest increased by 13,267. On March 21, total open interest declined by a substantial 29,126 contracts, which relative to volume is approximately 20% above average meaning liquidation was substantial on the modest advance. Yesterday, the May contract made a low of 40.41 which was lowest print since 40.00 made on March 17 and crude had a strong rally from the lows to close positively.
As this report is being compiled on March 22, the May contract is trading 12 cents lower after making a daily high of 41.90, which is 10 cents above yesterday’s high of 41.80. Yesterday, gasoline advanced 3.03 cents and on March 22 has gained 2.72 cents and stronger gasoline prices should help support crude oil. We have no recommendation.
The June euro lost 16 pips on volume of 118,337 contracts. Total open interest increased by 1,238 contracts, which relative to volume is approximately 50% below average, and an open interest increase on yesterday’s price decline is negative. As this report is being compiled on March 22, the June contract is trading 38 pips lower and has made a daily low of 1.1216, which is below yesterday’s print of 1.1262 and is the lowest print since 1.1233 made on March 17. The euro remains on short and intermediate term buy signals. We advise against shorting the euro.
The June British pound lost 8 pips on light volume of 60,419 contracts. Total open interest declined by a massive 5,098 contracts, which relative to volume is approximately 230% above average meaning liquidation was extremely heavy on the modest decline.
Yesterday, the pound market made a high of 1.4472 and fell to a low of 1.4368 on concerns about Brexit. This concern continues on March 22 and the pound is trading 1.82 cents lower and has made a daily low of 1.4194, which is the lowest print since 1.4058 made on March 16.
The recent COT report released last Friday showed that managed money added 38,693 contracts to their long positions and liquidated 10,117 of their short positions. We believe between March 15 and March 18 when the pound made its high for the move that additional short-sellers were blown out. On March 17 when the pound had a massive rally of 2.55 cents, total open interest declined by 1,247 indicating the rally was powered higher by distressed short-sellers. In summary, we believe that short sellers have been eliminated for the most part as a driver of higher prices.
We have been telling clients that we were looking to initiate bearish positions preferably at the end of March due to the strong seasonal tendency of the pound to advance in this time frame. However, it is highly likely the pound has made a significant turn beginning with yesterday’s trading. On March 18 the June contract made its high for the move of 1.4519. The pound has experienced a classic bear market rally, and it appears it will test the February 29 low of 1.3835.
Accordingly, we have recommended bearish positions earlier this morning and have suggested that options be used for risk mitigation purposes. On March 14, the June pound generated a short-term buy signal, and will generate a short-term sell signal if the daily high is below OIA’s key pivot point for March 22 of 1.4191. The pound remains on an intermediate term sell signal.
From the March 17 note on the pound:
“The COT report will be released this afternoon and this will give us an idea of the extent to which leverage funds have liquidated short positions. Ideally, we want to see the majority of these players get blown out because they are increasing buying pressure to the pound as it continues to firm.”
“Once short sellers are removed from the equation, the pound will need new buyers to move it higher, and this buying interest will dissipate once prices have reached a high enough level. Ultimately though, we think the pound is headed lower and that the Brexit story will begin to reassert itself as a major factor in the pound’s direction. Stand aside.”