Live cattle: On November 17, February 2017 live cattle generated an intermediate term buy signal after generating a short term buy signal on October 24. For input on how to trade live cattle, please call or email.
WTI crude oil:
December WTI crude oil lost 12 cents on volume of 1,079,220 contracts. Total open interest increased just 2,042, a number dramatically below average. The December contract accounted for a loss of 32,193. As this report is being compiled on November 18, the January 2017 contract is trading 14 cents above yesterday’s close. Although, WTI remains on short and intermediate term sell signals, we wanted to point out that the market has been acting firmly despite the massive advance in the dollar index. Usually, the dollar index is a force in the day-to-day fluctuations of crude oil. We recommend a stand aside posture.
The December dollar index rallied sharply on November 17, up 50.8 points on heavy volume of 58,167 contracts. Volume exceeded that of November 14 when the December contract gained 1.070 points (nearly twice the advance of November 17) on volume of 57,321 contracts and total open interest increased by 1,108. On November 17, total open interest increased by massive 2,541 contracts, which relative to volume is approximately 65% above average meaning aggressive new buyers continued to enter dollar index futures and drove it to a new contract high of 101.010.
As this report is being compiled on November 18, the December contract has made another new contract high of 101.54, which is getting close to the April 2003 high of 101.81. The rise of the dollar index has been nothing short of spectacular and has served to keep a lid on the S&P 500, as many of S&P 500 companies are affected negatively by a strong dollar. Additionally, the strong dollar has facilitated the crash of precious metals. The market is massively overbought and due for correction, but because of the November election, it is difficult to determine the scenario under which the dollar has an extended correction. We recommend a stand aside posture in the dollar index.
10 Year Treasury Note:
The December ten year note lost 12.5 points on volume of 1,695,783 contracts. Total open interest declined by 9,346 contracts, which relative to volume is approximately 75% below average. Yesterday, the December note made a new contract low of 125-265 and this has been taken out on November 18 with a new contract low of 125-140. The decline in the December ten year note has been spectacular in its size and duration. The yield on the 10 year note has made a new 52 week high of 2.355%, which surpasses the high of 2.35% made on December 4, 2015.
The move in the 10 year note should correct with a strong counter trend rally caused in great part by all the new short-sellers that have entered the market recently. However, as we have said in prior reports, we think the trend toward higher interest rates is now baked in and the result of the November 8 election will feed the market’s appetite for massive tax cuts and infrastructure spending, which is bullish for interest rates and very bad for the housing market.
The next two months will be a period of great uncertainty due to the fear of massive impending changes in the US government and their impact across a wide spectrum of economic and political interests. We recommend a stand aside posture in the 10 year note.