Bloomberg Access:{OIAR<GO>}

WTI crude oil:

December WTI crude oil lost 68 cents on surprising light volume of 868,333 contracts. Volume declined substantially from November 2 when the December contract lost $1.33 on volume of 1,157,293 contracts while total open interest increased by 10,698. On November 3, total open interest increased by an astounding 31,904 contracts, which relative to volume is approximately 25% above average. The December 2016 contract gained 8,730 of open interest. The massive increase of open interest on relatively low volume may indicate that crude oil is nearing a possible bottom.

The reason is that the massive increase of open interest at the lower end of the trading range indicates that Johnny-come-lately’s are entering the market in substantial numbers. As this report is being compiled on November 4, the December contract is trading lower again, down 66 cents and has made a daily low of 43.57 which takes out the September 20 print of 43.77 and is the lowest price since 43.38 made on August 11. On October 31, OIA announced that December WTI generated a short term sell signal and an intermediate term sell signal on November 2. We have no recommendation.

Natural gas:

December natural gas lost 2.3 cents on volume of 464,955 contracts. Total open interest increased by 9,005 contracts, which relative to volume is approximately 20% below average. The December contract gained 495 of open interest. November 3 was the third day in a row in which prices declined and total open interest increased, which indicates that new short-sellers continue to enter the natural gas market and drive prices lower.

Yesterday, the December contract made a low of 2.725 and this has not been taken out on November 4 as this report is being compiled. This is the lowest price on the daily continuation chart since 2.755 made by the November contract on October 25. On October 26, OIA announced that December natural gas generated short and intermediate term sell signals. We have no recommendation.

Dollar index: On November 3, the December 2016 and March 2017 dollar index contracts generated short term sell signals, but remain on intermediate term buy signals.

Euro: On November 3, the December 2016 and March 2017 euro generated short term buy signals, but remain on intermediate term sell signals.

Yen: On November 3, the December 2016 and March 2017 yen generated short term buy signals, but remain on intermediate term sell signals.

British pound: The December and March British pound will generate short term buy signals on November 4 and remains on intermediate term sell signals.

The December British pound advanced 1.70 cents on heavy volume of 235,300 contracts. Total open interest declined only 2,529 contracts, which relative to volume is approximately 50% below average. Leverage funds are very heavily short the British pound and according to the COT report released last Friday they were short by ratio of 3.29:1, down from the previous week of 3.37:1 and the ratio two weeks ago of 3.64:1.

Still, with the pound on a buy signal the rally can continue, which would serve to blowout a portion of weak short-sellers. As this report is being compiled on November 4, the December contract is trading 57 pips above yesterday’s close and has made a daily high of 1.2566, which is the highest print since 1.2634 made on October 7. We have no recommendation.

Gold:

December gold lost $4.90 on strong volume of 252,348 contracts. Total open interest declined just 162 contracts. Yesterday, the December contract made a low of 1286.20, which was slightly below the November 2 print of 1288.40. As this report is being compiled on November 4, the December contract is trading nearly unchanged on the day and has made a daily high of 1308.30, which is fractionally above yesterday’s print of 1308.00, but below the high for the move of 1309.30 made on November 2. The December contract has not taken out yesterday’s low. We recommend a stand aside posture until after the election because we think it is likely with a Clinton victory, gold will experience a pullback and this will likely be an opportunity to initiate bullish positions.