WTI crude oil:
December WTI crude advanced 82 cents on volume of 1,140,244 contracts. Total open interest increased by a sizable 26,020 contracts, which relative to volume is approximately 10% below average, and a total open interest increase on yesterday’s advance is positive. Additionally, the December contract lost 37 388 of open interest, which means there were additional open interest increases in the forward months to offset the decline in December and increase total open interest.
However, as this report is being compiled on November 8 the December contract is trading unchanged on the day after making a daily high of 45.26, which is slightly above yesterday’s print of 45.01. The equity market is rallying on November 8 and this is not giving a bid to oil. December WTI remains on short and intermediate term sell signals. We recommend a stand aside posture.
The December dollar index advanced by a strong 70.5 points on surprisingly subdued volume of 20,454 contracts. Total open interest increased by 894 contracts, which relative to volume is approximately 65% above average, indicating that new buyers were moving into the dollar index and sending prices higher.
As this report is being compiled on November 8, the December dollar index is trading 12.7 points higher on the day. On November 3, OIA announced that the December and March dollar indices generated short term sell signals, but remain on intermediate term buy signals. The COT report which was released last Friday showed that leverage funds added 353 to their long positions and liquidated 1,501 of their short positions. As of the latest report, leverage funds are long the dollar index by ratio of 1.11:1 up from the previous week of 1.04:1 and a complete reversal from the ratio two weeks ago when leverage funds were short by ratio of 1.08:1. We have no recommendation.
December gold lost $25.10 on volume of 263,164 contracts. Volume increased from November 4 when the December contract gained $1.20 on volume of 244,455 contracts and total open interest increased by 9,221. On November 7, total open interest declined by 10,962 contracts, which relative to volume is approximately 55% above average meaning liquidation was heavy on yesterday’s substantial decline.
The movement in precious metals and equity indices is dependent upon the perception of who will win the presidential election and the markets are telling us that a Clinton victory is at hand. As this report is being compiled on November 8, the December contract is trading $2.40 lower after making a daily high of 1291.50, which is below yesterday’s print of 1296.50. On November 1, OIA announced that December gold generated a short term buy signal and it remains on an intermediate term sell signal. Continue to stand aside.
S&P 500 E-mini:
The December S&P 500 E-mini rallied by an astounding 49.00 points on surprisingly muted volume of 1,767,013 contracts. Remarkably, volume was the lowest since October 31 when the December contract lost 3.75 points on volume of 1,373,495 and total open interest increased by 8,915. Additionally, volume was below that of November 4, the previous day (Friday) when the December contract lost 3.50 points on volume of 2,083,196 contracts and total open interest declined by 32,419.
The weak volume action on November 7 is troubling. However, it gets worse: on November 7, total open interest declined by 11,399 contracts, which relative to volume is approximately 60% below average, and a total open interest decline on such a strong advance is decidedly negative. Taking the low volume traded on November 7 along with the negative open interest action, would be market participants are not convinced of the rally and are not buying into it.
As this report is being compiled on November 8, the December contract is trading 12.75 points higher on low volume and has made a daily high of 2142.00, which is the highest print since 2143.75 made on October 27. We think a short term buy signal and then and intermediate term buy signal is imminent. The short term buy signal will occur when the daily low is above OIA’s he pivot point for November 8 of 2134.40. Due to the volatile nature of the market, we are not making recommendations in this report and suggest that clients speak with us before taking any specific action.