Live cattle On August 26, as this report is being compiled October live cattle is making a new contract low of 106.525 which takes out the previous contract low of 107.100 made on July 21. This is a five year low. On Monday, OIA will provide a report on today’s action. October live cattle remains on short and intermediate term sell signals.
November soybeans lost 29.75 cents on volume of 212,656 contracts. Total open interest increased only 301 contracts. However, the September contract lost 2,086 of open interest and the November 2016 contract lost 5,688, which means there were sufficient open interest increases in the forward months to offset the decline in these two delivery months and increase total open interest. Yesterday’s action was bearish.
As this report is being compiled on August 26, the November contract is trading sharply lower again, down 13.00 cents or -1.31% and has made a daily low of 9.60 1/2, which is the lowest print since 9.57 made on August 5. On August 17, OIA announced that November soybeans generated a short term buy signal and it appears this is going to be reversed next week. For the November contract to generate a short term sell signal, the high of the day must be below OIA key pivot point for August 26 of 9.76 3/4. We have no recommendation.
December corn lost 4.25 cents on volume of 315,914 contracts. Total open interest declined by 9,282 contracts, which relative to volume is approximately 10% above average. The September contract, which enters first notice day shortly lost 18,701 of open interest. As this report is being compiled on August 26 the December contract is trading 4.25 cents lower or -1.36%. On August 19, OIA announced that December corn generated a short term buy signal and appears likely this will be reversed, most likely on Monday. For a short term sell signal to occur, the high of the day must be below OIA’s key pivot point for August 26 of 3.32 7/8. We have no recommendation.
WTI crude oil:
October WTI crude oil the advanced 56 cents on light volume of 730,800 contracts. Volume was the weakest since July 28 when 733,125 contracts were traded and total open interest increased by 9,629 contracts while crude oil lost 78 cents and closed at 41.86. On August 25, total open interest increased by 16,174 contracts, which relative to volume is approximately 10% below average. The October contract gained 5,581 of open interest.
As this report is being compiled after the speech by the chair of the Federal Reserve, the October contract is trading 23 cents higher after making a daily high of 48.46, which slightly takes out the August 23 print of 48.32. October WTI remains on short and intermediate term buy signals. Although we have no specific recommendation, crude oil should be traded from the long side.
Natural gas: October and November 2016 natural gas will generate short term buy signals on August 26. The December 2016 contract will likely generate a short term buy signal on Monday. October, November and December natural gas remain on intermediate term buy signals. Today’s buy signals reverses the short term sell signals of August 10.
We recommend that clients initiate bullish positions using options in the December 2016 contract and use strikes appropriate for your risk tolerance. We think prices are going substantially higher.
October natural gas gained 5.00 cents on volume of 384,687 contracts. Total open interest declined by just 92 contracts. The September contract accounted for a loss of 5,631 of open interest and there were insufficient open interest increases in the forward months to offset the decline in September. The open interest action relative to price advances during recent sessions has been negative, but we expect this to reverse when many short-sellers realize they are on the wrong side of the trade. The COT report released last Friday showed that managed money was short by ratio of 1.34:1, which was up from the previous week of 1.25:1 and the ratio two weeks ago of 1.15:1. Commercial interests were long by ratio of 1.07:1.
As this report is being compiled on August 26 the October contract is trading 5.1 cents above yesterday’s close and has made a new high for the move of 2.940, which is the highest print since 2.947 made on July 29. As we pointed out in prior reports, natural gas is entering its strong seasonal period and the fact that managed money is heavily net short will add fuel to the upside move.
Gold: On August 25, December 2016 gold generated a short term sell signal, but remains on an intermediate term buy signal.
December gold lost $5.10 on volume of 195,369 contracts. Total open interest declined by massive 11,441 contracts, which relative to volume is approximately 135% above average meaning liquidation was extremely heavy on yesterday’s decline. The December contract accounted for a loss of 12,010 of open interest. As this report is being compiled after the speech by the chair of the Federal Reserve, December gold is trading slightly lower, down 10 cents and has made a daily low of 1321.20, which is fractionally above yesterday’s print of 1321.00. In the early going when the speech was being delivered, gold rallied up to 1346.00 and this was slightly above the August 24 print of 1344.10, but has since sold off. We have no recommendation.
S&P 500 E-mini:
The September S&P 500 E-mini is trading sharply lower, down 11.50 points after the speech by the chair of the Federal Reserve and has made a low of 2160.75, which is the lowest print since 2159.25 made on August 5. The September contract will generate a short term sell signal if the daily high is below OIA’s key pivot point for August 26 of 2166.54.