Bloomberg Access:{OIAR<GO>}

WTI crude oil: December 2016 and January 2017 WTI crude oil will generate intermediate term sell signals on November 2 after generating short term sell signals on October 31.

December WTI crude oil lost 19 cents on heavy volume of 1,476,887 contracts. Total open interest declined by 10,923 contracts, which relative to volume is approximately 60% below average. The December contract lost 10,745 of open interest. As this report is being compiled on November 2 after the release of the EIA storage report, which showed a massive build in inventory of 14.4 million barrels, the December contract is trading sharply lower, down $1.44 or -3.09% and has made a daily low of 44.96, which is the lowest print since 44.35 made on September 28.

Ever since generating a short term sell signal on October 31, WTI has not had its typical counter trend rally, which would have enabled clients to initiate bearish positions. We recommend AGAINST chasing the market lower and prefer to stand aside and wait for the rally.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 14.4 million barrels from the previous week. At 482.6 million barrels, U.S. crude oil inventories are at the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 2.2 million barrels last week, but are well above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 1.8 million barrels last week but are well above the upper limit of the average range for this time of year. Propane/propylene inventories rose 0.3 million barrels last week and are near the upper limit of the average range. Total commercial petroleum inventories increased by 9.0 million barrels last week.

Brent crude oil: January and February 2017 Brent crude oil will generate intermediate term sell signals on November 2 after generating short term sell signals on October 31.

Heating oil: December 2016 and January 2017 New York heating oil will generate short term sell signals on November 2. Both contracts remain on intermediate term buy signals.

Natural gas:

December natural gas fell by 12.4 cents on moderate heavy volume of 565,027 contracts. Volume declined from the near record-setting volume of 774,433 contracts traded on October 26 when natural gas fell 11.3 cents and total open interest declined by 12,107 contracts. On November 1, total open interest increased by a sizable 14,313 contracts, which relative to volume is average.

As this report is being compiled on November 2 the December contract is trading lower again, down 7.4 cents or -2.55% and has made a daily low of $2.779, which is the lowest price on the daily continuation chart since October 25 when the November contract printed 2.755. On October 26, OIA announced that December natural gas generated short and intermediate term sell signals. We recommend a stand aside posture.

Dollar index: The December dollar index will generate a short term sell signal if the daily high is below OIA’s he pivot point for November 2 of 97.553.

Euro: The  December euro will generate a short term buy signal provided the daily low is above OIA’s key pivot point for November 2 of 1.1077.

Yen: The December yen will generate a short term buy signal provided the daily low is above OIA’s key pivot point for November 2 of .9677.

Gold: On November 1, December 2016 and February 2017 New York gold generated short term buy signals, but remain on intermediate term sell signals.

December gold advanced $14.90 on strong volume of 228,094 contracts. Total open interest exploded higher, up 12,920 contracts, which relative to volume is approximately 125% above average meaning that aggressive new buyers were entering the market in very large numbers and driving prices higher (1292.90).

As this report is being compiled on November to prior to the release of the Federal Reserve minutes, the December contract is trading $20.10 or +1.56% above yesterday’s close and has made a daily high of 1309.10, which is the highest print since 1315.40 made on October 4, nearly one month ago. Now that gold is on a short term buy signal, we expect the market to experience a 1-3 day pullback and this will be the opportune time to initiate bullish positions.

The COT report released last Friday showed that managed money was long gold, but at a relatively low level of 3.61:1 and is the  second lowest reading since July 5. The prior week  recorded 3.22:1. In summary there is a substantial amount of firepower not in the market, which means after the pullback prices should attempt to test the July 5 high.

Silver: On November 1, December 2016 and March 2017 New York silver generated short term buy signals, but remain on intermediate term sell signals.

December silver advanced by a strong 62.2 cents on heavy volume of 105,561 contracts. Total open interest exploded higher, up 4,181 contracts, which relative to volume is approximately 55% above average. As this report is being compiled on November 2, the December contract is trading 26.7 cents above yesterday’s close and has made a daily high of $18.750, which is the highest print since 18.940 made on October 4.

Now that silver is on a short term buy signal, the market should experience of pullback lasting 1-3 days and this is the opportune time to initiate bullish positions. Based upon the recent COT report there is plenty of firepower that can enter the silver market and according to the latest stats, managed money was long silver by ratio of 2.39:1, which is the lowest ratio recorded since silver topped on July 5. The ratio of managed money longs during the time that silver made its contract high on July 5 exceeded 13 to 1.