Corn: December corn will generate a short term buy signal on August 19 provided the daily low remains above OIA’s key pivot point for August 19 of 3 39 7/8.
Live cattle: On August 18, October live cattle generated a short term sell signal, and remains on an intermediate term sell signal. December live cattle will generate a short term sell signal on August 19 provided the daily high remains below OIA’s key pivot point for August 19 of $113.117.
October live cattle lost 1.825 cents on volume of 41,461 contracts. Total open interest increased by 1,376 contracts, which relative to volume is approximately 20% above average. The August contract lost 1,418 of open interest, which means there were more than enough open interest increases in the forward months to offset the decline in the August contract and increase total open interest above average. The total open interest increase on August 18 is the second in a row and on August 17, the October contract lost 1.00 cent on volume of 30,319 contracts and total open interest increased by a massive 2,503.
As this report is being compiled on August 19 the October contract is trading nearly unchanged on the day. Although it appears that a test of the contract low of 107.100 made on July 21 is likely, we think the cattle market is in the process of making a bottom, but this could take at least a couple more of weeks. Stand aside.
Brent crude oil: On August 18, October and November Brent crude oil generated intermediate term buy signals after generating short term buy signals on August 12.
Heating oil: On August 18, September and October heating oil generated intermediate term buy signals after generating short term buy signals on August 12.
WTI crude oil: October WTI crude oil will generate an intermediate term buy signal provided the low of the day remains above OIA’s keep pivot point for August 19 of $48.26.
September WTI crude oil advanced $1.43 on volume of 1,003,746 contracts. Volume was the lowest since August 12 when crude oil gained $1.00 on volume of 980,804 contracts and total open interest declined by 12,331. On August 18, total open interest increased by a very disappointing 5,349 contracts, which is dramatically below average. The September contract lost 24,803 of open interest, which means there were only enough open interest increases in the forward months to offset the decline in September and increase total open interest fractionally.
Yesterday’s open interest action continues the dismal performance of it since the rally began on August 11. For the past five days, the September contract has gained $ 4.73 while total open interest has declined by a massive 85,732 in this time frame. Despite, the short term buy signal on August 15, crude has not had its typical pullback. Instead, crude oil has continued to move higher and as we have said repeatedly, total open interest in aggregate has not been increasing during the past five days of the rally.
As a result, we are leery of the move. From the beginning of the rally on August 11, there have been been only THREE days in which total open interest increased when prices advanced: August 11 when open interest increased by 74,112 when crude advanced $1.78, on August 15 when total open interest increased by a mere 78 contracts on an advance of 1.25 and yesterday’s increase of 5,349 on a strong advance of 1.43.
The rally that began on August 11 through August 18 has been fueled predominately by shorts covering their positions and this has been the driver of higher prices, not new buying except as noted. As this report is being compiled on August 19, The October contract is trading nearly unchanged on the day after making a fractional new high of 49.36, which is the highest print since 49.35 made on July 5. We continue to recommend a stand aside posture.
The September dollar index lost 55.3 points on volume of 24,304 contracts. Total open interest increased by 649 contracts, which relative to volume is average. As this report is being compiled on August 19, the September contract is having one of its rare rally days, up 42.3 points after being sharply lower for the past several. Although, the dollar index continues to display bearish price and open interest action, it is important to keep in mind there is increasing chatter about the Federal Reserve raising interest rates, and some think this could occur as early as September while others believe they will wait until after the election and make their move in December. The threat of a quarter-point rise is keeping the equity and commodity markets off-balance. Stand aside.
December gold advanced $8.40 on volume of 177,855 contracts. Total open interest increased by a massive 9,616 contracts, which relative to volume is approximately 120% above average meaning that aggressive new buyers were entering the market in large numbers and driving prices higher (1361.50). As stated before, we think clients should begin to position themselves on the bullish side of the market with the caveat that December gold has NOT made a low above OIA’s pivot point, which would indicate that a much higher move is ahead. For this to occur, the low of the the day must be above OIA’s key pivot point for August 19 of 1356.60. The low thus far on August 19 has been 1342.00.
As we alluded to in the research note on the dollar index, the specter of the Federal Reserve possibly raising interest rates is dampening enthusiasm for the precious metals and equities are struggling at the upper end of their recent trading range. After the question of whether interest rates are going to be raised at the upcoming September meeting is resolved, precious metals will continue their upward trajectory.
Another note of caution: December silver is going to generate a short term sell signal on August 19, and the performance of it during the next couple of days will inform us the extent to which gold is likely to pull back further. On August 19, the December contract is trading approximately $14.00 above its 50 day moving average of 1333.70 and trading close to its 20 day moving average of 1348.60. It is only approximately $37.00 from its contract high of 1384.40 made on July 6.
Silver: December New York silver will generate a short term sell signal on August 19, but it remains on an intermediate term buy signal.
December silver gained 9.2 cents on heavy volume of 94,356 contracts. Total open interest declined by 647 contracts, but this was due to the impending first notice day of the September contract, which lost 7,310 of open interest. As this report is being compiled on August 19, the December contract is trading sharply lower, down 39.3 or -1.98% and has made a new low for the move of $19.345, which is the lowest print since 19.365 made on July 21.
The recent weakness of silver is evident by its current price relative to its key moving averages. For example, the 20 day moving average stands at $20. 007 and currently the December contract is trading approximately 53 cents below the 20 day average. The 50 day moving average stands at 19.265 and currently the December contract is trading approximately 20 cents above this moving average.
Silver has a tendency to exhibit bouts of relative weakness to gold while at other times exhibiting relative strength. Currently, silver is in its relatively weak time frames, but, this can change in the blink of an eye when silver prices skyrocket relative to gold and volatility explodes higher. This makes options extremely expensive. Clients should keep this in mind when contemplating bullish positions in silver.