December live cattle advanced the daily limit of 3.00 cents on subdued volume of 45,808 contracts. Amazingly, volume increased slightly from October 19 when the December contract lost 2.10 cents on volume of 44,016 contracts and total open interest increased by 264. On October 20, total open interest increased by a disappointing 301 contracts, which relative to volume is approximately 70% below average. The October 2016 contract lost 621 of open interest, December 2016 -2524, which indicates that market participants in the December contract were taking the opportunity to liquidate their positions as the market rallied.
Live cattle is at a critical juncture as this report is being compiled on October 21. Currently, the December contract is trading 2.35 cents above yesterday’s close and has made a daily high of 103.000, the highest print since 103.800 made on October 10. This is near the area where a short term buy signal could occur. The first indication that a short term buy signal is likely will be if the December contract makes a daily low above OIA’s pivot point for October 21 of 102.240. A confirmed short term buy signal will occur when the December contract makes a daily low above OIA’s he pivot point for October 21 of 102.940. At this juncture we recommend a stand aside posture.
WTI crude oil:
December WTI crude oil lost $1.19 on reduced volume of 949,710 contracts. Volume declined substantially from October 19 when the December contract gained $1.20 on volume of 1,180,079 contracts and total open interest declined by 14,320 contracts, a bearish open interest statistic, relative to the price advance. On October 20, total open interest declined by 10,929 contracts, which relative to volume is approximately 45% below average. The November contract lost 14,750 of open interest.
The relatively low volume on yesterday’s decline indicates that longs are not panicking and if this continues, support for the market should remain in force. As this report is being compiled on October 21, the December contract is trading nearly unchanged on the day and has made a daily low of 50.21, which is slightly below yesterday’s print of 50.44. December WTI remains on short and intermediate term buy signals. We have no recommendation.
November natural gas lost 2.9 on volume of 436,197 contracts. Total open interest declined by 5,348 contracts, which relative to volume is approximately 45% below average. The November contract lost 17,103 of open interest. As this report is being compiled on October 21, the November contract is trading 10.5 cents lower on the day while the December contract is trading down 5.5 cents. The November contract is getting close to generating a short term sell signal, however, this contract will be expiring shortly. The December contract is approximately 10 cents away from a short term sell signal.
As we have said before, this is the period of time in which prices tend to decline and though we are bullish once winter approaches and temperatures dip below normal, we recommend a stand aside posture at this juncture.
The December dollar index advanced 37.4 points on volume of 32,896 contracts. Total open interest continues to explode higher, up by 1,634 contracts, which relative to volume is approximately 100% above average. Every time the dollar index advances substantially, it is accompanied by massive increases of open interest, which indicates that new buyers continue to rush into the dollar index and push it to multi-month highs.
As this report is being compiled on October 21 the December contract is trading 41.1 points higher and has made a daily high of 98.785, which is the highest print on the weekly chart for the December contract since February 29, 2016. The strong movement of the dollar index is keeping a lid on equity prices and the precious metals. We have no recommendation.
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