Bloomberg Access:{OIAR<GO>}

Live cattle:

December live cattle advanced 50 points on very light volume of 37,359 contracts. Volume declined from October 25 when the December contract lost 35 points on volume of 44,399 and total open interest increased by 2,517. On October 26, total open interest increased by a sizable 1,328 contracts, which relative to volume is approximately 25% above average. The October contract lost 547 of open interest.

As this report is being compiled on October 27, the December contract is rallying again, up 70 points and has made a daily high of 105.750, which is the highest print since 105.675 made on September 27. On October 24, December live cattle generated a short term buy signal and it remains on an intermediate term sell signal. For an intermediate term buy signal to occur the low of the day must be above OIA’s he pivot point for October 27 of 107.970.

Ever since generating the short term buy signal, the cattle market has not had his usual multi-day pullback. The closest came on October 25 when the December contract lost 35 points. We continue to think the rally is technical in nature and that a test of the October 14 low of 96.100 is in the offing.We recommend a stand aside posture.

Soybeans:

January 2017 soybeans advanced 18.75 cents on heavy volume of 409,867 contracts. Volume exceeded that of October 24 when the January contract gained 10.00 cents on volume of 383,308 contracts and total open interest declined by 1,774. On October 26, total open interest declined again, this time by 3,931 contracts, which relative to volume is approximately 50% below average. The November contract accounted for a loss of 26,011 contracts and there were insufficient open interest increases in the forward months to offset the decline in November. During two recent sessions when soybeans have advanced strongly, total open interest has declined. This indicates reluctance on the part of new participants to make commitments.

As this report is being compiled on October 27, the January contract is trading 5.25 cents above yesterday’s close and has made a daily high of 10.31, is the highest print since 10.38 1/4 made on July 20. Yesterday, the December soybean meal contract advanced sharply (and generated a short term buy signal) and this could provide new support for a continued move higher.

In previous reports, we discussed the move in soybean oil with the catalyst being the strong move and palm oil. On October 18, OIA announced that January soybeans generated a short term buy signal and and intermediate term buy signal on October 24. We have no recommendation except that clients should NOT attempt to pick the top in this market.

Soybean meal: On October 26, December 2016 and January 2017 soybean meal generated short term buy signals, but remain on intermediate term sell signals.

WTI crude oil:

December WTI crude oil lost 78 cents on elevated volume of 1,111,755 contracts. Volume increased from October 25 when the December contract lost 56 cents on volume of 874,343 and total open interest increased by 14,639. On October 26, total open interest increased again, this time by 12,757 contracts, which relative to volume is approximately 50% below average. The December contract gained 5,072 of open interest.

As this report is being compiled on October 27, the December contract is trading 77 cents higher and has made a daily high of 50.06, which is below yesterday’s print of 50.10 and a low of 49.00, which is above yesterday’s print of 48.87, the lowest price since 48.85 made on October 4. The December contract is getting close to generating a short term sell signal and this will occur if the daily high is below OIA’s he pivot point for October 27 of $49.25. The rally will resume if the December contract makes a daily low above OIA’s key pivot point for October 27 of 50.53.We recommend a stand aside posture.

Natural gas: On October 26, December 2016 and January 2017 New York natural gas generated short and intermediate term sell signals.

December natural gas lost 11.3 cents on heavy volume of 774,433 contracts. Volume exceeded that of October 25 when the December contract lost 17.00 cents on volume of 664,284 contracts and total open interest declined by 20,039. On October 26, total open interest declined again, this time by 12,107 contracts, which relative to volume is approximately 40% below average. The November contract accounted for a loss of 10,554 of open interest.

Yesterday, the December contract made a daily low of $2.972, which takes out the August 19 low of 3.01 and the June 2, 2016 print of 2.998.It appears that some longs are digging in and refusing to liquidate and though the open interest declines during the past several days have been healthy, we see more liquidation ahead. As this report is being compiled on October 27 the December contract is trading unchanged on the day and has not taken out yesterday’s low.

The Energy Information Administration announced on October 27 that working gas in storage was 3,909 Bcf as of Friday, October 21, 2016, according to EIA estimates. This represents a net increase of 73 Bcf from the previous week. Stocks were 52 Bcf higher than last year at this time and 182 Bcf above the five-year average of 3,727 Bcf. At 3,909 Bcf, total working gas is above the five-year historical range.