Bloomberg Access:{OIAR<GO>}

Live cattle:

December live cattle lost 15 points on volume of 69,972 contracts. Total open interest declined by 1,227 contracts, which relative to volume is approximately 25% below average. As this report is being compiled on October 4, the December contract is trading 1.95 cents above yesterday’s close on low volume. Yesterday, the October contract made a new contract low of 97.350, which is the lowest print on the monthly continuation chart since 97.100 made during the month of November 2010. Stand aside.

WTI crude oil:

November WTI crude oil gained 57 cents on low volume of 835,076 contracts. Volume declined from September 30 when the November contract advanced 41 cents on volume of 855,915 contracts and total open interest increased by 3,146. On October 3, total open interest declined by 9,875 contracts, which relative to volume is approximately 45% below average. The November contract accounted for a loss of 16,441 of open interest.

As this report is being compiled on October 4, the November contract is trading 16 cents above yesterday’s close (even though the dollar is trading sharply higher) and has made a new high for the move of 49.13, which takes out yesterday’s print of 49.02, and is the highest print since 49.08 made on August 22. November WTI remains on short and intermediate term buy signals, and we recommend that clients stand aside on new bullish positions until the market has corrected for at least 1-3 days.

Gold: On October 3, December 2016 New York gold generated short and intermediate term sell signals.

December gold lost $4.40 on light volume of 140,491 contracts. However, total open interest declined by a substantial 5,989 contracts, which relative to volume is approximately 65% above average meaning liquidation was substantial on yesterday’s modest decline. For the past several days beginning on September 27 through October 3, total open interest has declined by 44,626 contracts while the December contract has lost $31.40 in this time frame.

As this report is being compiled on October 4, the December New York gold contract is trading sharply lower, down $38.50 or -2.94% on very heavy volume. The December contract is trading on the lows and has just printed 1273.50, which is the lowest price since 1259.10 made on June 24. As we mentioned in yesterday’s report, the problem with gold is the huge number of speculative longs in the market and this crowd is liquidating, which will eventually reduce selling pressure and set up a bottom. According to the COT report released on Friday managed money is long gold by ratio of 10.46:1, which is the highest ratio in four weeks (previous high 13.17:1.) Stand aside.

From the September research note on gold:

“Looking at the chart, ever since December gold topped on July 5 it is clear that rallies have made a series lower highs. Currently, gold is trading at major support of 1300-1310. A break below this could spark massive liquidation and possibly send the December contract down in the range of its year to date and 200 day moving average of 1266.70 and 1256.90 respectively. We have encouraged clients to remain on the sidelines and though we think higher gold prices are likely in the months ahead, we would rather risk losing opportunity then risk losing money.”

Silver: On October 3, December 2016 New York silver generated and intermediate term sell signal and will generate a short term sell signal on October 4.

December silver lost 34.6 cents on volume of 56,571 contracts. Total open interest increased by 277 contracts, which relative to volume is approximately 75% below average, however, the total open interest increase on yesterday’s decline is bearish.

As this report is being compiled on October 4 the December contract is trading sharply lower, down $1.053 or -5.58% and has made a daily low of $17.745, which takes out the previous low of 17.960 made on June 29, but is above the June 24 print of 17.250. The COT report released on Friday revealed that though managed money was heavily long silver, but compared to gold, at a substantially reduced ratio of 4.74:1, which was up from the previous week of 4.19:1 and the ratio two weeks ago of 4.09:1.

Silver is declining by a substantially greater percentage than gold, but silver has always been the more volatile of the two. Another phenomena that we have written about over the years and longtime subscribers are aware of this-the worst part of a decline can occur at a relatively low level and  today’s action is an example of this. Stand aside.

Dollar index:

On September 19, OIA announced that the December dollar index generated a short term buy signal, and it now appears to be headed for an intermediate term buy signal. This will occur when the daily low is above OIA’s key pivot point for October 4 of 95.991 and the low thus far in trading has been 95.660. The sharply rising dollar is negatively impacting precious metals and equities. We will have a complete report tomorrow.