December live cattle gained 1.55 cents on low volume of 34,234 contracts. Volume was the weakest since October 6 when the December contract advanced 1.725 cents on volume of 35,453 contracts and total open interest increased by 1,041. On October 17, total open interest increased just 109 contracts. The October 2016 and December 2016 contracts lost a total of 1,117. The low volume and poor open interest increase tells the story: a lack of enthusiasm for the upside.
The COT report released last Friday showed that managed money liquidated 227 contracts of their long positions and added 2,085 to their short positions. Commercial interests added 1,317 to their long positions and liquidated 725 of their short positions. Remarkably, managed money remains net long and the ratio derived from the stats show that managed money was long by ratio of 1.49:1, though this was down from the previous week of 1.56:1 and the ratio two weeks ago of 1.58:1.
It continues to amaze OIA that managed money remains net long in the face of contract lows and multiyear lows last seen in October 2010. As this report is being compiled on October 18 the December contract is trading higher, up 80 points. Stand aside.
Soybeans: November soybeans will generate a short term buy signal on October 18 provided the daily low is above OIA’s key pivot point for October 18 of 9.70 1/8. November soybeans remain on an intermediate term sell signal.
November soybeans advanced 15.75 cents on volume of 257,769 contracts. Volume declined from October 14 when the November contract gained 6.25 cents on 319,680 contracts and total open interest increased by 3,945. On October 17, total open interest declined by 4,297 contracts, which relative to volume is approximately 35% below average. As this report is being compiled on October 18, the November contract is trading 6.00 cents higher and has made a daily high of 9.87, which is the highest print since 9.90 1/4 made on September 21. No recommendation.
Cotton: December cotton will generate a short term buy signal on October 18 and is getting close to generating an intermediate term buy signal as well.
December cotton advanced 62 points on volume of 25,155 contracts. Total open interest exploded higher, up 3,225, which relative to volume is approximately 450% above average, meaning that aggressive new buyers were entering the market in substantial numbers and pushing prices higher (71.26).
The COT report revealed that managed money liquidated 9,953 of their long positions and added 2,819 to their short positions. Commercial interests added 1,166 to their long positions and liquidated 7,392 of their short positions. As of the latest report, managed money is long cotton by ratio of 4.39:1, down substantially from the previous week of 6.12:1 and the ratio two weeks ago of 6.78:1. Of the agricultural commodities we follow, cotton has the most bullish fundamental setup.
WTI crude oil:
November WTI crude oil lost 41 cents on light volume of 940,461 contracts. Volume was the weakest since October 4 when the November contract lost 12 cents on volume of 929,944 contracts and total open interest declined by 2,735. On October 17, total open interest declined by 14,019 contracts, which relative to volume is approximately 40% below average. The November contract lost 49,845 of open interest.
Crude oil has been trading firmly ever since it generated short and intermediate term buy signals in late September.We cannot recommend bullish positions due to the inherent negative fundamental set up for crude. Additionally, the market must decisively break above the neck line of the reverse head and shoulders pattern on the weekly continuation chart. This would necessitate that crude advance beyond the high for the move thus far of 51.60 made on October 10 and make a weekly low above it.