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WTI crude oil: November and December WTI crude oil will generate short and intermediate term buy signals on September 29.

November WTI crude oil rocketed higher on September 28 by $2.38 on record-setting volume of 1,678,371 contracts. Total open interest increased by 39,706 contracts, which relative to volume is approximately 10% below average. There were open interest increases in the November 2016 through June 2017 contracts. Considering the magnitude of yesterday’s move and the reason for it, the total open interest increase left much to be desired. The catalyst for yesterday’s move with the announcement that OPEC had reached an agreement to restrict production and though this is the first such move in a couple of years, it remains to be seen whether production quotas can be effectively enforced.

Nonetheless, yesterday’s announcement was a bullish development for crude oil and the products and as this report is being compiled on September 29, the rally continues with the November contract trading 1.20 above yesterday’s close and has made a new high for the move of 48.32, which is the highest print since 48.46 made on August 26. Now that crude oil is on short and intermediate term buy signals, we expect a pullback lasting from 1-3 days and this will be the opportunity to initiate bullish positions if you are so inclined. Do NOT chase this rally. Wait for the pullback.

Based upon last week’s COT report, managed money was long WTI by a ratio of 1.79:1 which is below the previous week’s ratio of 2.39:1 and the ratio two weeks ago of 2.00:1. In summary, there is room for new longs to come into the market and the current ratio stands at a very low level. Additionally, we want to remind clients there is a reverse head and shoulders pattern on the weekly chart with the neckline at approximately the 51.00 level. A break above this may portend another leg higher.

Brent crude oil: December 2016 and January 2017 Brent crude oil will generate short and intermediate term buy signals on September 29.

Gasoline: November and December 2016 gasoline will generate short and intermediate term buy signals on September 29.

Heating oil: November and December 2016 heating oil will generate short and intermediate term buy signals on September 29.

Gold:

December gold lost $6.70 on volume of 179,694 contracts. Total open interest declined by a massive 8,755 contracts, which relative to volume is approximately 75% above average meaning liquidation was heavy on yesterday’s decline. For the past two days, the December contract has lost $20.40 while total open interest has declined by a substantial 25,567 contracts.

As this report is being compiled the December contract is having a slight rally after making a new low for the move of 1318.60, which is the lowest print since 1310.90 made on September 21.The equity markets are rolling over and the S&P 500 E-mini is trading 17.50 lower, but this is giving gold very little in the way of a lift in prices. As we have said before, gold has been unable to find a catalyst to send prices sustainably higher. Even the extreme concern about the financial condition of Deutsche Bank is not aiding gold prices. Conceivably, if the situation at the bank worsens, gold may find its footing once again. December gold remains on short and intermediate term buy signals.

S&P 500 E-mini:

The December S&P 500 E-mini gained 10.50 points on volume of 1,736,884 contracts. Volume exceeded that of September 27 when the December contract advanced 13.00 points on volume of 1,661,229 and total open interest declined by 5,315. On September 28, total open interest increased by 17,222 contracts, which relative to volume is approximately 50% below average.

 As this report is being compiled on September 29, the December contract is trading 17.50 points lower on concern about Deutsche Bank and its financial condition. On September 12, the December S&P 500 E-mini generated a short term sell signal, and remains on an intermediate term buy signal. Despite the rally of the past couple of days, a new short term buy signal has not been generated. For this to occur the low of the day must be above OIA’s key pivot point for September 29 of 2163.30. We have no recommendation.