Gold: On March 22, April and June 2017 New York gold generated short term buy signals and remain on intermediate term buy signals.
April gold advanced $3.20 on volume of 252,780 contracts. Total open interest increased by 5,977 contracts, which relative to volume is approximately 10% below average. The total open interest increase in yesterday’s trading confirms that new buyers continue to flood into the gold market and drive it to multi-week highs (1251.50).
As this report is being compiled on March 23, the April contract is pulling back a bit, trading down $5.40, but has made another new high for the move of 1253.30. As we pointed out in yesterday’s report, gold has a weak dollar and a lower 10 year note yield in its favor. Although we think the gold moves higher, we have no specific recommendation.
British pound: On March 22, the June British pound generated short and intermediate term buy signals.
The June British pound advanced 12 pips on volume of 113,464 contracts. Total open interest declined by massive 4,104 contracts, which relative to volume is approximately 25% above average. This indicates that short-sellers continue to power the market higher.
As this report is being compiled on March 23, the June contract is trading 36 pips above yesterday’s close and has made another new high for the move of 1.2560, which is the highest print since 1.2604 made on February 24. We think the path of least resistance is higher for the British pound and the market looks like it’s going to shake out the substantial net short position held by leverage funds. No recommendation.
10 Year US Treasury Note: On March 22, the June 10 year US treasury note generated short and intermediate term buy signals.
The June 10 year note advanced 8 points on volume of 1,680,211 contracts. Total open interest declined just 1,096 contracts. Today, on March 23, the June contract is having its typical pullback after the generation of buy signals and trading 6 points lower. It appears that the 10 year is headed higher for now, although we think the rally will be short lived. We have no recommendation.
S&P 500 E-mini: On March 22, the June S&P 500 E-mini generated a short term sell signal, but it remains on an intermediate term buy signal.
The June S&P 500 E-mini gained 0.25 points on volume of 1,885,830 contracts. Total open interest declined by 6,166 contracts, which relative to volume is approximately 85% below average. As this report is being compiled on March 23, the June contract is having its typical counter trend rally after the generation of the sell signal.
Based upon our calculations, the rally can carry up to the 2365 area before resuming its downtrend. That would be in opportune time to initiate light bearish positions. This is not a new bear market, just a shakeout. However, keep in mind, that the passage or non-passage of the healthcare bill is likely going to have a substantial impact on the market.