October live cattle lost 90 points on heavy volume of 67,609 contracts. Volume declined from August 30 when the October contract gained 2.40 cents on volume of 72,260 contracts and total open interest increased by 1,414. On August 31, total open interest increased by 2,443 contracts, which relative to volume is approximately 20% above average meaning aggressive new short-sellers were entering the market in substantial numbers and driving prices lower. The August and October 2016 contracts lost 948 of open interest, which means there were more than enough open interest increases in the forward months to offset the decline in the two delivery months and increase total open interest substantially.
As this report is being compiled on September 1, the October contract is trading sharply lower, down 2.10 or -1.95% and has made a new contract low of 103.700, which takes out the August 30 print of 103.775. As we said in yesterday’s report, the cattle market is beginning to trade down into the range where it should find support and we tend to think that cattle is within 4.00 cents of a significant bottom. However, October live cattle is quite a distance from generating a short term buy signal and that the market will trade at the lower end of the range for a period of time before beginning a slow ascent. For now stand aside.
WTI crude oil: October and November WTI crude oil will generate intermediate term sell signals on September 1.
October WTI crude oil lost $1.65 volume of 960,439 contracts. Total open interest increased by 18,251 contracts, which relative to volume is approximately 20% below average, but an open interest increase on yesterday’s steep decline is bearish. The October contract gained 5,668 of open interest. As this report is being compiled on September 1, the October contract is trading sharply lower again, down $1.29-2.89% and has made a daily low 43.35, which is the lowest print since 41.85 made on August 11. The October contract will generate a short term sell signal if the daily high is below OIA’s key pivot point for September 1 of $44.64 and it appears likely the sell signal will be at will occur in Monday’s trading. We have no recommendation.
Brent crude oil: November and December Brent crude oil will generate and intermediate term sell signal on September 1 and likely generate a short term sell signal on Monday. For this to occur the high of the day in the November contract must be below OIA’s key pivot point for September 1 of $46.92.
Gasoline: On August 31, October and November gasoline generated short term sell signals and remain on intermediate term sell signals.
Natural gas: Prior to the release of today’s EIA storage report for natural gas, we recommended that clients liquidate bullish positions.
October natural gas advanced 6.00 cents on volume of 308,192 contracts. Total open interest increased for the first time on the price advance during the recent rally by 8,197, which relative to volume is average. The October contract gained 6,458 of open interest. As this report is being compiled on September 1, the October contract is trading sharply lower, down 9.00 cents or -3.12%.
Our reason for recommending the liquidation of bullish positions was that prior to the report the market was trading lower and had not taken out yesterday’s high of 2.90, despite yesterday’s very favorable price and open interest action. It appears that the impact of hurricane activity is not going to impact the natural gas market and therefore we recommend a sideline stance. However, do not short natural because it remains on short and intermediate buy signals.
Dollar index: On August 31, the September and December dollar index generated short and intermediate term buy signals. We have no recommendation.
Euro: On August 31, the September and December euro generated a short term sell signals, but remain on intermediate term buy signals.
Canadian dollar: On August 31, the September and December Canadian dollar generated short term sell signals, but remain on intermediate term buy signals.