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WTI crude oil: April and May 2017 WTI crude oil will generate short and intermediate term sell signals on March 8.

We have been advising clients to stand aside in crude because it was unable to make a daily low above our pivot point, which would have indicated that a rally was going to ensue. As this report is being compiled on March 8, the April contract is trading sharply lower, down $1.95 or -3.67% on heavy volume and has made a daily low of 51.17, which takes out the December 1, 2016 print of 51.52. We will issue a report on today’s activity tomorrow.

The Energy Information Administration announced  on March 8 that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 8.2 million barrels from the previous week. At 528.4 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 6.6 million barrels last week, but are near the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 2.7 million barrels last week but are near the upper limit of the average range for this time of year. Propane/propylene inventories fell 4.1 million barrels last week but are in the middle of the average range. Total commercial petroleum inventories decreased by 2.4 million barrels last week.

Copper: On March 7, May New York copper generated a short term sell signal, but remains on an intermediate term sell signal. An intermediate term sell signal will be generated if the daily high is below OIA’s key pivot point for March 8 of $2.6144.

May copper lost 3.35 cents on volume of 87,396 contracts. Total open interest declined by 1,120 contracts, which relative to volume is approximately 45% below average. As we said in yesterday’s report, the heavy long position of managed money will continue to exert selling pressure on copper as prices move lower.

As this report is being compiled on March 8, the May contract is trading 1.85 cents lower on the day and has made a new low for the move of $2.5975, which is the lowest print since 2.5980 made on January 20. In yesterday’s research note, we mentioned that due to the illiquidity of options on futures and that futures themselves are too volatile to trade, we recommended using the copper ETF JJC as a vehicle to trade copper. Wait for a counter trend rally that may last from 1-3 days before initiating bearish positions.

Gold: On March 7, April New York gold generated a short term sell signal, but remains on an intermediate term buy signal. An intermediate term sell signal will be generated if the daily high is below OIA’s key pivot point for March 8 of $1189.90.

April gold lost $9.40 on volume of 239,137 contracts. Total open interest declined by 5,587 contracts, which relative to volume is approximately 10% below average. The COT report which was issued last Friday show that managed money added 23,798 contracts to their long positions and liquidated 12,406 of their short positions. Commercial interests liquidated 998 of their long positions and added 10,580 to their short positions.

As of February 28, the date of the tabulation of the report, managed money was long gold by ratio of 3.19:1, up sharply from the previous week of 2.21:1 and almost double the ratio two weeks ago of 1.88:1.Managed money became extremely bullish at the top of the move, which is typical for this crowd.

There are major headwinds facing the gold market and two key factors are the rising dollar and rising interest rates. Both are very bearish for gold and the real test will be whether gold is able to generate an intermediate term sell signal. As we pointed out in the March 2 research note, we felt gold had to do more work at the lower end of its trading range, but as stated in the note, the longer-term moving averages are in a bearish set up. Stand aside.

From the March 2 research note on gold:

“As we pointed out in previous research notes on gold, the moving average setup continues to be bearish. However, it appears that the market is doing the necessary work at the lower end of its two week trading range of weeks that could signify a significant bottom is in place. Eventually, this will set the stage for a move substantially higher. We continue to be cautious bulls, but cannot at this juncture recommend bullish positions.”

Silver: On March 7, May New York silver generated a short term sell signal, but remains on an intermediate term buy signal. For an intermediate term sell signal to occur, the high of the day must be below OIA’s key pivot point for March 8 of $17.011.

May silver lost 23.7 cents on volume of 58,803 contracts. Total open interest declined by 1,449 contracts, which relative to volume is average. The COT report released on Friday revealed that managed money added 6,323 to their long positions and liquidated 1,090 of their short positions. Commercial interests added 1,868 to their long positions and also added 3,714 to their short positions.

As of February 28 when the of the report was compiled, managed money was long silver by a stratospheric 8.58:1, up substantially from the previous week of 7.31:1 and the ratio two weeks ago a 7.08:1. The set up in silver is potentially far more bearish than gold due to the huge number of spec longs in the market. This has the potential of sending silver sharply lower from here. As this report is being compiled on March 8, the May contract is trading 23.1 cents lower on the day, -1.32% versus gold -0.56% and has made a daily low of $17.245, which is the lowest print since 17.335 made on February 3. Stand aside.