December live cattle lost 1.40 cents on volume of 52,740 contracts. Volume declined from September 21 when the December contract gained 1.30 cents on volume of 53,033 contracts and total open interest declined by 1,749. On September 22, total open interest increased by 486 contracts, which relative to volume is approximately 45% below average, but an open interest increase on yesterday’s price decline is bearish and this follows a series of days when price and open interest action has been bearish. Additionally, the October contract lost 4,318 of open interest, which means there were more than enough open interest increases in the forward months to offset the decline in October and increase total open interest.
As this report is being compiled on September 23, the December contract is trading sharply lower, down 2.55 cents or -2.38%. Although December cattle has been rallying in recent days, we have cautioned clients that it had to generate a short term buy signal before there was any chance of our recommending bullish positions. The market is headed for a test of its contract low of 101.275 made on September 6 and the multi-year low on the continuation chart of 99.375. Continue to stand aside.
From the September 14 research note on live cattle:
“It should be noted that the October contract made its contract low of 99.375, a multi-year low on September 6 and we expect an attempt to test this low before a bottom is finally in. Continue to stand aside.”
WTI crude oil:
November WTI crude oil advanced 98 cents on volume of 1,074,726 contracts. Total open interest declined by 15,633 contracts, which relative to volume is approximately 40% below average, but an open interest decline on yesterday’s advance is bearish. The October contract lost 2,463 of open interest. As this report is being compiled on September 23 the November contract is trading $1.46 lower and has made a daily low of 44.44, which is above the September 21 print of 44.50.
Although, it came come close, the November contract was unable to generate a short term buy signal and we have recommended a sideline stance. We envision a test down to the 43.00 area and will reassess crude oil’s prospects at that time. November crude oil generated an intermediate term sell signal on September 1 and a short term sell signal on September 2.
Gold: On September 22, December gold generated a short term buy signal, which reversed the short term sell of September 16, December gold remains on an intermediate term buy signal. On September 16, December gold generated a short term sell signal, which reversed the September 7 short term buy signal.
December gold advanced $13.30 on volume of 181,419 contracts. Volume declined substantially from September 21 when the December contract gained 13.20 on volume of 285,602 and to contracts and total open interest increased by 17,955. On September 22, total open interest increased massively again, this time by 10,066 contracts, which relative to volume is approximately 120% above average meaning that new buyers were aggressively entering the market and driving prices to a new high for the move of 1347.80, which is the highest print since $1353.90 made on September 8.
We have recommended that clients begin to position themselves on the bullish side of gold and though the market has been trading sideways for the past couple of weeks, we think it is poised to move higher in the period just ahead. As this report is being compiled on September 23 the December contract is trading $2.10 lower on low volume and has made a daily low of 1337.40, which is above yesterday’s print of 1335.10. For further confirmation of the uptrend, we want to see the December contract make a daily low above the pivot point of 1340.20.
December S&P 500 E-mini:
The December S&P 500 E-mini gained 12.00 points on volume of 1,525,414 contracts. Total open interest increased just 5,348 contracts, which relative to volume is approximately 80% below average, a very disappointing total open interest increase considering the magnitude of the advance. However, this follows another disappointing open interest increase on September 21 when the December contract gained 25.25 points on volume of 1,830,488 contracts and total open interest increased just 13,468, which is substantially below average.
On September 12, the December S&P 500 E-mini generated a short term sell signal, and as yet has NOT generated and intermediate term sell signal. As this report is being compiled on September 23 the December contract is trading 7.75 points lower and has made a daily low of 2160.50, which is above yesterday’s print of 2152.75. Though the market has rallied strongly, it has been unable to generate a short term buy signal to reverse the September 12 short term sell signal.
For this to occur the low of the day must be above OIA’s key pivot point for September 23 of 2167.20. We have no strong feelings about the market and think it can go either way at this juncture. As a consequence, we recommend a stand aside posture.