Bloomberg Access:{OIAR<GO>}

WTI crude oil:

May WTI crude oil advanced 25 cents on volume of 920,706 contracts. Total open interest increased just 3,777 contracts, a number that is dramatically below average and which indicates a lack of enthusiasm for the upside by new buyers. The May contract lost 3,692 of open interest. As this report is being compiled on April 3, the May contract is trading 27 cents lower and has made a daily high of 50.83, which is 2 cents below Friday’s print of 50.85. The May contract closed at $50.60, which is the highest close for the May contract since 50.83 on March 8. We consider this to be one of the confirming factors that suggest higher prices are ahead.

The COT report revealed that managed money liquidated 16,201 contracts of their long positions and added 6,953 to their short positions. Commercial interests liquidated 6,297 of their long positions and also liquidated 14,599 of their short positions. As of the COT tabulation date of March 28, managed money was long by ratio of 2.56:1, down from the previous week of 2.83:1 and the ratio two weeks ago of 2.98:1.

In the COT report of three weeks ago, managed money was long by a ratio of 6.84:1. This is a positive set up going forward because it means that potential new buyers who are out of the market may reenter as prices move higher.

As this report is being compiled on April 3, the May contract is trading 32 cents lower and has made a daily low of 50.12 as of this writing, which is above Friday’s print of 49.90. For the May contract the generate a short term buy signal, the low of the day must be above OIA’s key pivot point for April 3 of $50.21. Stand aside.

Heating oil: May and June New York heating oil will generate a short term buy signal on April 3 but remains on an intermediate sell signal.

May heating oil advanced 1.41 cents on light volume of 109,861 contracts. However, total open interest declined massively, down 5,774, which relative to volume is approximately 75% above average. The April contract lost 3,112 of open interest.

The COT report released on Friday revealed that managed money liquidated 401 contracts of their long positions and also liquidated 123 of their short positions. Commercial interests added 3,398 to their long positions and also added 4,110 to their short positions. As of the March 28 tabulation date for the report, managed money was long heating oil by ratio of 1.86:1, down fractionally from the previous week of 1.87:1 and down substantially from the ratio two weeks ago of 2.85:1.

As this report is being compiled on April 3, the May heating oil contract is trading 77 points lower on the day or -0.49%. We have no recommendation. However, now with heating oil on a short term buy signal along with gasoline, the products will support higher crude oil prices.

Gasoline:

May gasoline advanced 1.93 cents on volume of 153,336 contracts. Total open up interest increased by 3,251 contracts, which relative to volume is approximately 20% below average, but a total open interest increase on yesterday Friday’s advance is positive. On Friday, the May contract made a high of 1.7100, which is the highest print since 1.7285 made on March 8.

The COT report revealed that managed money liquidated 1,130 of their long positions and added 1,701 to their short positions. Commercial interests liquidated 3,135 of their long positions and also liquidated 5,223 of their short positions. As of the March 28 tabulation date, managed money was long gasoline by ratio of 1.45:1, down from the previous week of 1.55:1 and substantially below the ratio two weeks ago of 1.92:1.

As we pointed out in previous reports, we think gasoline is heading higher, perhaps substantially so as the summer driving season begins and there seems to be much optimism about the state of the economy, at least for now. The market has been trading in a very firm manner and ever since it generated a short term buy signal on March 30, it has not had the typical 1-3 day correction. Previously, we have recommended the gasoline ETF, UGA for those who trade equities and recommend using options on futures to trade gasoline.

Euro:

The June euro will generate a short term sell signal if the daily high is below OIA’s key pivot point of 1.0719. Interestingly, the daily high on April 3 is right at the pivot point. If the June contract is unable to break above today’s high of 1.0719, we will call a short term sell signal in the euro, even though the daily high is not BELOW the pivot point.

The inability for the euro to rally beyond its daily high on April 3 and close the gap between 1.0719 and Friday’s close of 1.0722 reveals internal weakness.

On Friday, the June euro lost 65 pips on volume of 183,997 contracts. Total open interest declined by 3,935 contracts, which relative to volume is approximately 20% below average. The COT report revealed that leverage funds added 2,816 to their long positions and liquidated 6,168 of their short positions. As a result, leverage funds were short the euro as of the March 28 tabulation date by ratio of 2.08:1, down from the previous week of 2.30:1 and substantially below the ratio two weeks ago of 3.06:1. Stand aside for now.

EUR/GBP:  EUR/GBP will generate an intermediate term sell signal on April 3 after generating a short term sell signal on March 31. We have no recommendation.

S&P 500 E-mini:

The June S&P 500 E-mini lost 5.25 points on Friday on volume of 1,569,764 contracts. Total open interest declined by 13,844 contracts, which relative to volume is approximately 55% below average. As this report is being compiled on April 3, the June contract is trading 11.50 points lower on the day and has made a daily low of 2340.00, which is the lowest print since 2338.25 made on March 23.

The COT report for the large S&P 500 futures contract (250 x), revealed that leverage funds added 2,264 to their long positions and also added 395 to their short positions. As of the March 28 tabulation date, leverage funds in this futures contract were short by ratio of 1.47:1, down from the previous week of 2.69:1 and the ratio two weeks ago of 3.26:1.

While we think this is a garden-variety pullback, we are concerned it could turn into a full-fledged correction.  We will become more concerned if an intermediate term sell signal is generated.

On March 22, OIA announced that the June S&P 500 E-mini generated a short term sell signal. An intermediate term sell signal will occur if the daily high is below OIA’s he pivot point for April 3 of 2306.90. As we pointed  out previously, the S&P 500 looks tired and we see no reason to be involved on the long or short side.