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Live cattle: February live cattle will generate a short-term buy signal on December 23 if the daily low remains above OIA’s key pivot point for December 23 of 1.3100. The February contract will remain on an intermediate term sell signal.

February live cattle advanced 1.775 cents on heavy volume of 71,154 contracts. Total open interest increased by 1,330 contracts, which relative to volume is approximately 25% below average. However, the December and February contracts lost a total of 3,398 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in the two delivery months and increase total open interest. Since the rally began after making a contract low of 1.21975 on December 17, total open interest has been declining and this is the first day of an increase.

As this report is being compiled on December 23, the February contract is trading 2.70 cents above yesterday’s close and has made a new high for the move of 1.34800,which is the highest print since 1.35000 made on December 1. From the contract low through today’s high, the market has rallied 12.825 cents and for the rally to continue, fresh new buying needs to enter the market. For an intermediate term buy signal to be generated, the low of the day must be above OIA’s key pivot point for December 23 of 1.37045. The bullish cattle on feed report was the catalyst for the rally, and cattle is entering its traditional period of seasonal strength. We have no recommendation.

WTI crude oil:

February WTI crude oil advanced 33 cents on light holiday volume of 548,948 contracts. Total open interest increased by 7,450, which relative to volume is approximately 45% below average. The January contract accounted for loss of 623 of open interest. As this report is being compiled on December 23 after the release of the EIA report, the February contract is rallying sharply, up $1.36 or + 3.62% and has made a daily high of 37.44, which is the highest print since 38.53 made on December 16. No recommendation.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 5.9 million barrels from the previous week. At 484.8 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories increased by 1.1 million barrels last week, but are in the lower half of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories decreased by 0.7 million barrels last week but are in the upper half of the average range for this time of year. Propane/propylene inventories fell 1.3 million barrels last week but are well above the upper limit of the average range. Total commercial petroleum inventories decreased by 5.3 million barrels last week.

Dollar index:

The March dollar index lost 12.5 points on volume of 18,025 contracts. Total open interest declined by a massive 2,383 contracts, which relative to volume is approximately 375% above average meaning liquidation was off the charts heavy on the modest decline. For the past three days beginning on December 18, the March contract has declined by 1.076 points while total open interest has declined by 7,713 contracts.

Although, the March contract remains on short and intermediate term buy signals, heavy liquidation on declines for the past three days is of concern. We have no recommendation.

Euro:

The March euro advanced 27 pips on light holiday volume of 139,941 contracts. Total open interest declined by 216 contracts, which relative to volume is minuscule and substantially below average. As this report is being compiled on December 23, the March contract has reversed course and trading 73 pips lower on the day. For the downtrend to resume, the high of the day must be below OIA’s pivot point for December 23 of 1.0872 and a buy signal will occur if the daily low is above OIA’s key pivot point for December 23 of 1.0976. The March contract remains on a short and intermediate term sell signal.We have no recommendation.

Yen:

The March yen lost 15 pips on volume of 72,505 contracts. Total open interest declined by 3,837 contracts, which relative to volume is approximately 105% above average meaning liquidation was extremely heavy on the modest decline. During the past two days beginning on December 21, the March contract has lost 3 pips while total open interest has declined by 11,209 contracts.

The yen’s performance has been outstanding and ever since it generated a short-term buy signal on December 21 has not had a pullback. On December 18, the March contract advanced 111 pips and since then the yen is trading higher on December 23 than it was on December 18.

Another important point: despite the three-day rally in the S&P 500 E-mini, the yen continues firm, and usually it trades inversely to the S&P 500. We are waiting for a setback before recommending bullish positions.

S&P 500 E-mini:

The March S&P 500 E-mini advanced 21.00 points on light holiday volume of 1,145,941 contracts. Total open interest declined by 19,556 contracts, which relative to volume is approximately 25% below average, but a total open interest decline on yesterday’s price advance is negative.

As this report is being compiled on December 23, the March contract is trading higher again, up 15.25 points and has made a daily high of 2053.50, which is the highest print since 2072.75 made on December 17. The 50 day moving average for the S&P 500 cash index has just crossed above the 200 day moving average.

For the March contract to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point for December 23 of 2059.90. There is one more trading day until the Christmas holiday, and we see no reason why the market will not continue to rally into tomorrow’s close. As a result, we recommend a stand aside posture. However, we will be evaluating the possibility of reinstating short call positions in the January 2016 December S&P 500 E-mini contract. The March contract remains on a short-term sell signal, but an intermediate term buy signal.