Bloomberg Access:{OIAR<GO>}

WTI crude oil:

June WTI crude oil lost 49 cents on lighter than recent volume of 946,669 contracts. Total open interest increased by just 2,717, a figure that is substantially below average. The June contract accounted for a loss of 26,370 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in June and increase total open interest. As this report is being compiled on May 16, the June contract is trading sharply higher, up $1.42 and has made a new high for the move of 47.85, which is the highest print since 48.36 made the week of November 2, 2015.

Many professionals in the financial press have been calling for a resumption of the downtrend and as readers of this report know, we have not been one of them. Although, open interest action has been at times negative, the June contract has not come close to generating short or intermediate term sell signals. The COT report released last Friday showed that managed money was long by ratio of 3.07:1, which is down from the previous week of 3.94:1 and the ratio two weeks ago of 4.07:1.

For the June contract to generate a short-term sell signal, the high of the day must be below OIA’s key pivot point for May 16 of $43.46. Taking into account that the average true range (21 days) is $1.79, a sell signal would occur when the June contract made a low of approximately $41.66, which is approximately $6.00 below today’s high. We have no recommendation.

Gold:

June gold gained $1.50 on volume of 192,217 contracts. Total open interest increased by 1,375 contracts, which relative to volume is approximately 60% below average. The June contract accounted for a loss of 3,320 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in June and increase total open interest.

As this report is being compiled on May 16 the June contract is trading $3.20 above Friday’s close and has made a daily high of 1290.40, which is the highest print since 1289.50 made on May 9. For the uptrend to resume, the June contract must make a daily low above OIA’s pivot point of 1275.50 and then a low above 1284.10.

The COT report released on Friday showed that managed money remains long gold by a ratio of 6.93:1, which is down substantially from the previous week’s ratio (the high ratio thus far in the bull market) of 8.31:1. The current ratio is above that of two weeks ago of 6.00:1. In summary, there are large numbers of  speculative longs in the market, and if gold begins to decline substantially, the lopsided long position could add selling pressure to the market.

Impressively, gold has held up extremely well and continues to trade at the upper end of the trading range even after it made its contract high of 1306.00 on May 2. We continue to advocate a stand aside posture, especially since it appears highly likely that the dollar index will generate a short-term buy signal on May 16. A continued advance in the dollar index would likely pressure gold.

Dollar index: The June dollar index will generate a short term buy signal on May 16 provided the daily low remains above OIA’s key pivot point for May 16 of 94.307.

The June dollar index advanced by a strong 46.5 points on volume of 23,718 contracts. Total open interest declined by a massive 2,533 contracts, which relative to volume is approximately 325% above average, meaning liquidation was off the charts heavy on Friday’s advance. As this report is being compiled on May 16 the June contract is trading 12.3 points lower and has made a daily low of 94.380, which is above OIA’s key pivot point for the generation of a short term buy signal.

The COT report released last Friday reveals that managed money remains short the dollar index by a ratio of 1.51:1, which is down from the previous week of 1.61:1 and the ratio two weeks ago of 1.57:1. This means that once a short-term buy signal is generated and the dollar index has had its pullback, there will be short-sellers likely powering the market higher. We do not think this is a change in the major trend, rather a short term blip.We have no recommendation.

Euro: The June euro will generate a short term sell signal provided the daily high is below OIA’s key pivot point for May 16 of 1.1346.

The June euro lost 68 pips on volume of 177,306 contracts. Total open interest increased by 2,944, which relative to volume is approximately 35% below average, but an open interest increase on Friday’s decline is negative. The June contract made a low of 1.1292 and this has not been taken out on May 16.

Since the daily high in the June contract is 1.1351, a short-term sell signal will not be generated on May 16. The COT report revealed that leverage funds remain short the euro by ratio of 1.73:1, which is down slightly from the previous week of 1.75:1 and the ratio two weeks ago of 1.91:1. We have no recommendation.

British pound: The June pound will generate a short-term sell signal provided the daily high is below OIA’s key pivot point for May 16 of 1.4404.

The June pound lost 86 pips on volume of 92,493 contracts. Total open interest increased by 518 contracts, which relative to volume is approximately 70% below average.As this report is being compiled on May 16 the June contract is trading 31 pips above Friday’s close and has made a daily high of 1.4416, which is above OIA’s key pivot point for the generation of a short-term sell signal.The COT report revealed that leverage funds remain short the British pound by ratio of 1.12:1, which is down from the previous week of 1.40:1 and the ratio two weeks ago of 1.56:1.

The British pound volatility index has skyrocketed and has been advancing for the past several days, which makes options very expensive. One way to trade this is to short out of the money calls in nearby contracts, but clients should make sure that these are liquidated prior to the vote to exit the European Union.

S&P 500 E-mini:

The June S&P 500 E-mini lost 15.25 points on volume of 1,881,502 contracts.Total open interest increased by 6,795 contracts, which is substantially below average. As this report is being compiled on May 16 the E-mini has reversed and the June contract is trading 17.00 points higher.

We think it is likely that the market will test the April 20 high of 2105.25. Currently, the June contract remains on a short term sell signal, but an intermediate term buy signal. For the short term sell signal to reverse, the June contract must make a daily low above OIA’s key pivot point for May 16 of 2079.90.We have no recommendation