October live cattle lost 1.025 cents on very heavy volume of 91,986 contracts. Volume was the strongest since May 12 when 111,699 contracts were traded and the October contract closed at 118.100. On September 8, total open interest declined only 246 contracts, which relative to volume is approximately 85% below average. However, the October contract lost 6,750 of open interest, which means there were almost enough open interest increases in the forward months to offset the decline in October, which means there were substantial open interest increases and that new short-sellers were entering the market.
As this report is being compiled on September 9 the October contract has reversed course and is trading sharply higher, up 2.725 cents or +2.71% and has made a daily high of 104.400, which is the highest print since 104.000 made on September 2. The cattle market is whip sawing anyone trading the market and as clients know, we have recommended a stand aside posture. At this juncture, there is no reason to be involved in the cattle market, although it has been trading into its long-term value area.
WTI crude oil:
October WTI crude oil advanced $2.12 on heavy volume of 1,399,019 contracts. Volume was the strongest since September 6 when the October contract gained 39 cents on volume of 1,471,667 contracts and total open interest increased by 28,605. On September 8, total open interest increased by 23,756 contracts, which relative to volume is approximately 35% below average. However, the October contract lost 42,000 contracts 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. Yesterday’s action was constructive. However, it is a different story on September 9 and the October contract has reversed course and is trading 1.42 lower on the day.
Yesterday, October crude was unable to generate a short term buy signal and will not generate a short term buy signal on September 9. For a short term buy signal to occur, the low of the day must be above OIA’s key pivot point for September 9 of $46.97 and the low thus far in trading on September 9 has been 46.15. Penetration of 45.90 would be negative and portend further downside action. Stand aside.
December gold lost $7.60 on volume of 191,886 contracts. Volume increased from September 7 when the December contract lost 4.90 on volume 06 164,880 contracts and total open interest increased by 7,810 and on September 7 generated a short term buy signal. On September 8, total open interest declined by 5,245 contracts, which relative to volume is average.
Yesterday, marked the first day of corrective activity which usually occurs after the generation of a short term buy signal. Today, September 9 is the second day and conceivably there could be one more down day on Monday. However, this should be the extent of the correction. On September 9, the dollar index is trading sharply higher while the S&P 500 E-mini is trading sharply lower and this undoubtedly is weighing on gold and the precious metals.
We recommend waiting until Monday before entering bullish positions market. The gold volatility index GVZ is trading at the very low end of its multi-month range, which means that options are inexpensive. For the December contract to generate a short term sell signal, which would reverse the September 7 short term buy signal the high of the day must be below OIA’s key pivot point for September 9 of $1330.30.
December silver lost 17.00 cents on volume of 54,299 contracts. Total open interest declined by 701 contracts, which relative to volume is approximately 45% below average. As this report is being compiled on September 9, the December contract is trading 24.3 cents lower on the day and has made a daily low of $19.380 which takes out the September 6 print of 19.550 and is the lowest since 18.825 made on September 2.
The silver volatility index for the ETF stands at 25.39 on September 9, and this is up from the three month low of 22.14 made on August 17. On July 5 the index stood at 37.70, which was the day that December silver made its contract high of $21.225. Relatively low volatility means that silver options are inexpensive and we recommend using options to trade silver.
On September 7, December silver generated a short term buy signal and remains on an intermediate term buy signal. Yesterday was the first day of the correction and this continues on September 9. If silver continues its pullback on Monday, this should be the extent of the move before resuming the uptrend. For December silver to generate a short term sell signal, the high of the day must be below OIA’s key pivot point for September 9 of $19.118.
S&P 500 E-mini:
The September S&P 500 E-mini will not generate a short term sell signal on September 9, even though it is trading 34.25 points lower and has made a daily low of 2142.00, which is the lowest print since 2141.50 made on August 2. More than likely the short term sell signal will occur on Monday which means the high of the day must be below OIA’s key pivot point for September 9 of 2168.33. We have no recommendation.