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Soybean meal: May soybean meal will generate a short-term buy signal on March 7 if the daily low remains above OIA’s key pivot point for March 6 of $266.20.

WTI crude oil: April WTI is getting close to generating an intermediate term buy signal, and this will occur when the daily low is above OIA’s key pivot point for March 7 of $37.04.

April WTI crude oil advanced $1.35 on volume of 1,029,008 contracts. Total open interest increased by 25,160 contracts, which relative to volume is average. The April contract gained 7,453 of open interest. As this report is being compiled on March 7, the April contract is rocketing higher, up $2.14 or +5.93% And has made a new high for the move of $38.11, which is the highest print since 38.39 made on January 4, 2016.

On March 3, OIA announced that April and May WTI crude oil generated short-term buy signals, and since then the market has moved higher without the usual 1-3 day pullback. This means the correction will occur from a higher level. The open interest action on advances has been outstanding with consistent open interest increases as prices move higher. This indicates that new buyers are entering the market and are the chief drivers of higher prices.

We advise against chasing the market, and the rally has taken many by surprise, but not clients of OIA. Gasoline will generate a short-term buy signal on March 7 and February heating oil has been on a short-term buy signal since February 8. Improved product values will support higher WTI prices.

Brent crude oil: May Brent crude oil will generate an intermediate term buy signal on March 7 if the daily low remains above OIA’s key pivot point for March 7 of $37.72.

May Brent crude oil advanced $1.65 on surprisingly light volume of 790,774 contracts. Total open interest increased by a disappointing 4,853 contracts, which relative to volume is approximately 65% below average. However, the May contract lost 12,345 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in May and increase total open interest slightly.

As this report is being compiled on March 7, the May contract is rocketing higher, up $1.75 or +4.60% and has made a daily high of $40.68 which is the highest print since 40.67 made December 10, 2015. On February 26, OIA announced that May Brent crude oil generated a short-term buy signal. Remarkably, ever since the short-term buy signal was generated, the May contract has traded firmly and has not had the usual 1-3 day pullback. The correction will come from a higher level, perhaps tomorrow if the intermediate buy signal is generated on March 7.

Gasoline: On March 7, April and May gasoline will generate a short-term buy signal, but remains on an intermediate term sell signal. 

April gasoline advanced 3.33 cents on volume of 163,494 contracts. Total open interest increased by 4,130 contracts, which relative to volume is average. The April contract accounted for a loss of 1,240 of open interest. Friday’s open interest action relative to the price advance was the best we have seen in quite a while. As this report is being compiled on March 7, the April contract is trading sharply higher, up 5.87 cents and has made a new high for the move of 1.4000, which is the highest print since 1.4221 made on January 8. We have no recommendation.

Heating oil: On March 7, April and May heating oil will generate intermediate term buy signals after generating short term buy signals on February 8.

Gold:

April gold advanced $12.50 on huge volume of 392,581 contracts. Volume was the strongest since February 11 when gold advanced $53.20 on volume of 392,267 contracts and made a new high for the move at that time of 1263.90. On March 4, total open interest increased by 8,727 contracts, which relative to volume is approximately 10% below average, but Friday’s open interest increase indicates that new buyers continue to rush into the market and this pushed the April contract to a new contract high of 1280.70.

As this report is being compiled on March 7, the April contract is trading $7.80 lower and has made a daily low of 1260.20, which is above Friday’s print of 1250.10.While yesterday’s price, volume and open interest action was outstanding, we have discovered over many years that huge volume spikes accompanying new highs can signal a top or temporary top.

This occurred on February 11 when the April contract made its high for the move and then proceeded to sell off approximately $70.00. Additionally, it is reported that demand for gold ETF’s has skyrocketed, which means that Mr. and Mrs. America have rushed in to buy gold, a concern when evaluating the probability of a temporary market top. We continue to recommend a stand aside posture and let gold go through its corrective-consolidating phase.

From the March 3 note on gold:

“Obviously, the market is massively overbought and open interest stats show that new buyers are rushing into the market for fear of missing out on the move. We advise against entering new bullish positions at current levels and from the seasonal point of view both gold and silver prices tend to trade in a sideways pattern during March, April and May.”

Dollar index:

The March dollar index lost 25.8 points on volume of 37,425 contracts. Total open interest declined by 397 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on March 7, the March contract is trading 23.3 points lower on the day.

We continue to be unimpressed with the performance of the dollar index, especially after it generated a short-term buy signal on February 29. The 50 day moving average has crossed beneath the 100 day moving average, and the market has to overcome the resistance of a double top made in March 2015 and December 2015. This means the euro needs to weaken can considerably. While this may happen, much of it will depend upon the actions of the ECB this week. We have no recommendation.

Euro:

The March euro advanced 42 pips on very heavy volume of 358,688 contracts. Total open interest declined by 2,175 contracts, which relative to volume is approximately 60% below average, and a total open interest decline on Friday’s advance is negative.The March contract lost 14,582 of open interest and faces expiration in the next two weeks.

As this report is being compiled on March 7, the March contract is trading 6 pips higher on the day. All eyes will be on the ECB March 10 when the quantitative easing announcement is expected, and this will determine the immediate direction of the euro. It is likely the euro has discounted much of what will be said unless there is a major surprise. Stand aside until after the announcement on March 10.

British pound:

The March British pound advanced 42 pips on volume of 113,293 contracts. Total open interest declined by 3,515 contracts, which relative to volume is approximately 10% above average. The March contract, which is facing expiration during the next two weeks lost 13,278 of open interest. On Friday, the March pound made a high of 1.4251 and this has been taken out on March 7 with another new high for the move of 1.4285. We think the British pound is a terrific candidate for bearish positions, but we are waiting a couple more days before making a recommendation.

Canadian dollar:

The March Canadian dollar advanced 44 pips on volume of 73,585 contracts. Total open interest increased by 741 contracts, which relative to volume is approximately 50% below average. The March contract accounted for a loss of 48 contracts. As this report is being compiled on March 7, the March contract is trading 20 pips higher and has made another new high for the move of 75.40, which is the highest print since 75.22 made the week of November 30, 2015. The March contract has gotten close to our target, which for this week is 75.79 down from 75.85 last week. Although the Canadian dollar currently is in nosebleed territory, we cannot recommend bearish positions when leverage funds remain massively net short. We continue to recommend a stand aside posture.

Australian dollar:

The March Australian dollar advanced 70 pips on heavy volume of 122,037 contracts. Total open interest increased by 422 contracts, which relative to volume is approximately 80% below average, however, the March contract lost 1,060 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in March and increase total open interest slightly.

As this report is being compiled on March 7, the March contract is trading higher again, up by 49 pips and has made a new high for the move of 74.82, which is the highest print since July 2015. In the latest COT report, managed money finally moved to a net long position and this may spell the end to the rally. We have no recommendation.