October live cattle advanced 2.40 cents on volume of 58,225 contracts. Volume was the weakest since August 29 when the October contract lost 1.275 cents on volume of 50,072 contracts and total open interest increased by 532. On September 7, total open interest increased by massive 3,146 contracts, which relative to volume is approximately 110% above average meaning aggressive new buyers were entering the market and driving prices higher (102.850).
As this report is being compiled on September 8, the October contract is trading sharply lower, down 1.60 cents or -1.56% and has made a daily low of 100.425, which is above yesterday’s print of 99.525. The market is going to test the September 6 print of 99.375, which is the lowest price since 97.100 made by the December 2010 contract in November 2010. Stand aside.
WTI crude oil:
October WTI crude oil gained 67 cents on volume of 918,692 contracts. Total open interest increased just 3,063 contracts, which relative to volume is approximately 85% below average.The October contract lost 22,022 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in October and increase total open interest slightly. As this report is being compiled on September 8 after the release of the EIA report, the October contract is trading sharply higher, up $1.68 or +3.69% on a substantial inventory draw. This may be an artificial number due to hurricane activity during the past week.
For a short term buy signal to occur, the daily low must be above OIA’s key pivot point for September 8 of $46.77 and the low thus far in trading on September 8 has been 45.77. Stand aside.
The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 14.5 million barrels from the previous week. At 511.4 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories decreased by 4.2 million barrels last week, but are well above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories increased by 3.4 million barrels last week and are above the upper limit of the average range for this time of year. Propane/propylene inventories rose 0.6 million barrels last week and are above the upper limit of the average range. Total commercial petroleum inventories decreased by 13.7 million barrels last week.
Gold: On September 7, December 2016 New York gold generated a short term buy signal, which reversed the August 25 short term sell signal. December gold remains on an intermediate term buy signal.
December gold lost $4.90 on light volume of 164,880 contracts. Total open interest increased by 7,810, which relative to volume is approximately 75% above average meaning that aggressive short-sellers were entering the market and driving prices lower (1346.90). During the past two days, December gold has gained $22.40 while total open interest has increased by a sizable 36,601 contracts. This represents potential selling pressure if the market continues to pullback as it is doing on September 8.
Typically, after the generation of a short term buy signal, markets have a tendency to pullback from 1-3 days and this is the opportune time to enter bullish positions. It appears likely that at least another day of corrective activity is in the cards and the December contract is trading near it’s 20 day and 50 day moving averages of 1338.10 and 1343.80 respectively. Continue to stand aside and wait for more corrective activity.
Silver: On September 7, December 2016 New York silver generated a short term buy signal, which reversed the August 19 short term sell signal. December silver remains on an intermediate term buy signal.
December silver lost 29.00 cents on volume of 57,186 contracts. Total open interest increased just 135 contracts, which is dramatically below average. As this report is being compiled on September 8, the December contract is trading 16.8 cents lower or -0.85% versus gold trading -0.58% and has made a daily high of 20.020, which is below yesterday’s print of 20.235 and a daily low of $19.630, which is the lowest print since 19.550 made on September 6.
Typically, after the generation of a short term buy signal, markets have a tendency to pull back from 1-3 days and this is the opportune time to initiate bullish positions. We recommend using options to trade silver due to its volatility, however the spread between the bid and ask is fairly substantial, therefore we recommend working a bid to get the best possible price.
The Federal Reserve will be meeting in approximately two weeks and the announcement after the meeting on Wednesday, September 21 is sure to be a major market mover. While the odds of a rate increase or low, it cannot be ruled out that an increase is possible. Precious metals may anticipate that a rate increase is off the table and therefore may rally or remain firm until the announcement.