WTI crude oil:
June WTI crude oil lost 19 cents on volume of 1,184,699 contracts. Total open interest increased by 7,239 contracts, which relative to volume is approximately 70% below average. The June contract accounted for a loss of 38,750 of open interest, which means there were more than enough open interest increases in the forward months to offset the decline in June and increase total open interest substantially below average. Yesterday’s action was a neutral reading.
As this report is being compiled after the release of the EIA storage report, which showed a stock decline, the June contract is trading 48 cents above yesterday’s close and has made a daily high of 49.50, which is slightly above yesterday’s print of 49.38. Yesterday, it appeared as if the June contract would generate a short term buy signal, but late in the session the American Petroleum Institute storage numbers were released, which sent the June contract to a low of 48.17. Today’s low has been 48.03. We think a short term buy signal is likely in the period immediately ahead. At this juncture, we have no recommendation
The Energy Information Administration announced on May 17 that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.8 million barrels from the previous week. At 520.8 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Total motor gasoline inventories decreased by 0.4 million barrels last week, but are above the upper limit of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories decreased by 1.9 million barrels last week but are in the upper half of the average range for this time of year. Propane/propylene inventories increased by 0.6 million barrels last week but are in the lower half of the average range. Total commercial petroleum inventories increased by 4.3 million barrels last week.
June natural gas lost 11.9 cents on volume of 551,265 contracts. Volume was the strongest since May 11 when the June contract generated a short term buy signal and it advanced 8.4 cents on volume of 559,342 contracts and total open interest increased by 16,672. On May 16, total open interest declined by 6,255 contracts, which relative to volume is approximately 45% below average. The June contract accounted for a loss of 17,301 of open interest.
Though, the total open interest decline indicates liquidation was sending prices lower, it was light considering the magnitude of the decline. Yesterday, the June contract made a low of $3.216 and this has been violated on May 17 with another new low of 3.165, the lowest print since 3.140 made on May 8.
The June contract is trading 4.6 cents lower or -1.42%. It appears likely that natural gas is headed toward a short term sell signal and this will occur if the daily high is below OIA’s key pivot point for May 17 of $3.213 and the high thus far in trading has been 3.269. Tomorrow is the EIA storage report for natural gas and this is always a major market mover that either could confirm or negate the possibility of a short term sell signal.
Dollar index: On May 16, the June and September dollar index generated a short term sell signal, which reversed the May 11 short term buy signal. Both contracts remain on intermediate term sell signals.
The June dollar index lost 80.3 points on volume of 33,576 contracts. Total open interest exploded higher, up 2,718 contracts, which relative to volume is approximately 230% above average meaning short sellers were the driver of lower prices.
The COT report released last Friday revealed that leverage funds liquidated 937 of their long positions and added 3,084 to their short positions. As of the May 9 tabulation date, leverage funds were long the dollar index by a ratio of 2.76:1, down sharply from the previous week of 3.97:1 and the ratio two weeks ago of 5.93:1. We have found it remarkable that leverage funds have stubbornly held on to their long positions despite the abysmal performance of the dollar index.
As this report is being compiled on May 17, the dollar index is trading sharply lower again, down 41.1 points and has made a new low of 97.435, which is the lowest print since 95.750 made on November 9, 2016 during the US presidential election. Stand aside.
The June euro advanced by 1.17 cents on volume of 232,950 contracts.Total open interest exploded higher by an astounding 12,575 contracts, which relative to volume is approximately 120% above average and this indicates that new buyers were entering the market in large numbers and driving the euro to a high of 1.1115.
As this report is being compiled on May 17, the June contract continues its advance, up 51 pips or +0.47% and has made a new high for the move of 1.1168, which is the highest print since 1.1408 made on November 9, 2016, during the time of the US presidential election.
On March 13, OIA announced that the June euro generated a short term buy signal and an intermediate term buy signal on March 16. Although, we are bullish on the euro, we recommend against chasing the market due to its extreme overbought condition. Yesterday, (Tuesday) is going to be the tabulation date for the upcoming COT report to be released this Friday and it will be interesting to see whether the large short contingent in the euro has been shaken loose. According to last week’s report leverage funds are short the euro by a ratio of 2.02:1. We recommend a stand aside posture. Do not short the euro.
EUR/GBP: On May 16, EUR/GBP generated a short term buy signal and remains on an intermediate term sell signal, though this should reverse in the next day or two.
Yen: The Japanese yen is trading sharply higher on May 17 as the US stock market falls sharply. Currently the June contract is trading 158 pips above yesterday’s close or +1.78%. Although the June contract will not generate a short term buy signal on May 17, this could occur tomorrow. For a short term buy signal to occur, the low of the day must be above OIA’s key pivot point for May 17 of .8989.
Heating oil: On May 16, June and July 2017 New York heating oil generated short term buy signals. Both contracts remain on intermediate term sell signals.
Live cattle: On May 16, June and August 2017 Chicago live cattle generated short term sell signals. Both contracts remain on intermediate term buy signals.
10 Year US Treasury Note: The June 10 year note will not generate a short term buy signal on May 17.
On May 17, the June 10 year US treasury note is rocketing higher, up 27 points on heavy volume and has made a new high for the move of 126-135, which takes it back to levels last seen in late April. The June contract may be headed for a reversal of the short term sell signal that we announced on May 4. For this to occur, the low of the day must be above OIA’s key pivot point for May 17 of 125-235. Tomorrow, we will provide a report on today’s activity.
S&P 500 E-mini: the June S&P 500 E-mini will not generate a short term sell signal on May 17 even though it is trading sharply lower.
The Bloom is finally off the rose for the so-called “Trump rally” and currently the June S&P 500 E-mini is trading 30.50 points lower or -1.27%. For the June contract to generate a short term sell signal, the high of the day must be below OIA’s he pivot point for May 17 of 2373.46 and the high thus far in trading, has been 2396.75 and the low of 2365.50, which is the lowest print since 2365.25 made on April 24. Tomorrow, we will provide a full report on today’s activity. Please call or email with any question.