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Live cattle: On December 23, February live cattle generated a short-term buy signal, but remains on an intermediate term sell signal.

February live cattle advanced 2.875 cents on heavy volume of 70,349 contracts. Volume declined somewhat from December 22 when the February contract gained 1.775 cents on volume of 71,154 and total open interest increased by 1,330 contracts. On December 23, total open interest increased again, this time by 5,309 contracts, which relative to volume is approximately 205% above average meaning large numbers of aggressive new buyers were entering the market and driving prices higher (1.34 800). The December contract lost 600 of open interest, February 2016 -945, which means there were sufficient open interest increases in the forward months to offset the declines in the two delivery months and increase total open interest substantially.

For the past two days, the February contract has gained 4.65 cents while total open interest has increased by 6,639 contracts. This is bullish. As this report is being compiled on December 24, the February contract is trading higher again, this time by 1.325 or +0.98%.

Now that live cattle is on a short-term buy signal, the market should have a pullback lasting 1-3 days before resuming the uptrend. After the pullback, the February contract must generate an intermediate term buy signal to continue the advance. This will occur if the daily low is above OIA’s key pivot point for December 24 of 1.37045.  Do not chase this market.

WTI crude oil:

February WTI crude oil advanced $1.36 on volume of 644,205 contracts. Volume was the strongest since December 18 when the February contract lost 21 cents on volume of 696,858 contracts and total open interest declined by 9,021. On December 23, total open interest declined by 2,619, which relative to volume is approximately 80% below average, however, a total open interest decline on yesterday’s sizable advance is bearish. The January contract accounted for loss of 1,186 of open interest.

As this report is being compiled on December 24, the February contract is trading 53 cents above yesterday’s close or + 1.41%. February WTI remains on short and intermediate term sell signals. We have no recommendation.

Dollar index:

The March dollar index advanced 12.3 points on light holiday volume of 16,838 contracts. Total open interest increased by 168 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on December 24, the March contract is trading 33.7 points lower, and has made a daily low of 97.935, which takes out yesterday’s print of 98.210 and the December 22 low of 98.005.

It appears increasingly likely that the dollar index is headed towards a short-term sell signal. For this to occur, the daily high must be below OIA’s key pivot point for December 24 of 98.009. The rally will resume if the March contract makes a daily low above OIA’s pivot point for December 24 of 98.697. We have no recommendation.

Euro:

The March euro lost 43 pips on volume of 119,730 contracts. Total open interest increased by 2,640 contracts, which relative to volume is approximately 10% below average, but an open interest increase on yesterday’s decline is bearish. As this report is being compiled on December 24, the March contract is trading 38 pips higher and has made a daily high of 1.0991, which is above yesterday’s print of 1.0980.

For the March contract to generate a short-term buy signal, the daily low must be above OIA’s key pivot point for December 24 of 1.0976. The decline will resume if the daily high is below OIA’s pivot point for December 24 of 1.0872. The March euro remains on short and intermediate term sell signals. We have no recommendation.

Yen:

The March yen advanced 11 pips on volume of 48,329 contracts. Total open interest increased by 457 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on December 24, the March contract is trading 39 pips above yesterday’s close and has made a new high for the move of .8331, which is the highest print since .8332 made on December 14.

On December 21, OIA announced the March contract generated a short-term buy signal and for an intermediate term buy signal to be generated (which we think is inevitable), the daily low must be above OIA’s key pivot point for December 24 of .8307. We are waiting for a pullback before recommending bullish positions. The market is very strong, but we recommend against chasing the yen at current levels.

Australian dollar:

The March Australian dollar advanced 18 pips on light holiday volume of 33,166 contracts. Total open interest declined by a massive 2,667 contracts, which relative to volume is approximately 230% above average meaning liquidation was extremely heavy on the modest advance. The Australian dollar has consistently experienced negative price and open interest action: open interest declines on price advances and increases when prices decline.

However, the Australian dollar has never generated short and intermediate term sell signals, though it has come close. As this report is being compiled after the close of a holiday shortened session, the Australian dollar has closed at 72.47, which is the highest print since 72.40 made on December 16.

Today, the March contract made a daily low of 72.00, which is above OIA’s pivot point of 71.96. This means the Australian dollar has resumed its uptrend. Do not short the Australian dollar. The March contract remains on short and intermediate term buy signals.

S&P 500 E-mini:

The March S&P 500 E-mini advanced 17.00 points on light holiday volume of 1,005,668 contracts. Total open interest declined by 29,027 contracts, which relative to volume is average. The total open interest decline is negative and follows the negative open interest action relative to the price advance on December 22. On December 22, the March contract gained 21.00 points on volume of 1,145,941 contracts and total open interest declined by 19,556.

In summary, short sellers covering positions have been driving prices higher for the past two days, not new buying. Yesterday, the March contract made a high of 2057.75 and as this report is being compiled on December 24, the March contract has made a fractional new high of 2059.75, however as the close approached, the market sold off to nearly an unchanged level.

The March contract remains on a short-term sell signal, but an intermediate term buy signal and for a short-term buy signal to occur, the low of the day must be above OIA’s key pivot point for December 24 of 2060.15. We are watching the market carefully to determine exactly when short call positions in the January contract should be initiated. It appears likely the bulk of the rally has occurred, but we reserve judgment until early next week.