December live cattle lost 2.10 cents on volume of 44,016 contracts. Total open interest increased by 264 contracts, which relative to volume is approximately 75% below average, but a total open interest increase on yesterday’s sharp decline is bearish. The October 2016 contract lost 994 of open interest. As this report is being compiled on October 20, the December contract is trading sharply higher, up 2..875 cents on low volume. Stand aside.
WTI crude oil:
December WTI crude oil advanced $1.20 on volume of 1,180,079 contracts. Volume was the strongest since October 14 when the December contract lost 9 cents on volume of 1,204,374 contracts and total open interest declined by 35,721. On October 19, total open interest declined by 14,320 contracts, which relative to volume is approximately 45% below average, but a total open interest decline on yesterday’s sharp advance is decidedly negative. The November contract accounted for a loss of 38,091 of open interest, which means that there were insufficient open interest increases in the forward months to offset the decline in the November contract. On October 19, the December contract made a high of 52.22, which was only slightly above the October 10 print of 52.16.
As this report is being compiled on October 20 the December contract is trading 97 cents lower and has made a daily low of 50.48, which is above the October 18 print of 50.13. Yesterday’s strong price movement, but negative open interest action may indicate that crude has found its ceiling. This area coincides with the neck line of the reverse head and shoulders pattern on the weekly continuation chart. Stand aside.
November natural gas lost 9.3 cents on volume of 447,130 contracts. Total open interest declined by 7,333 contracts, which relative to volume is approximately 35% below average. The November contract accounted for a loss of 17,231 of open interest. As this report is being compiled the November contract is trading 3.2 cents lower and has made a daily low of 3.101, which is the lowest print since 3.015 made on October 7.
The natural gas market has been trading firmly and on a seasonal basis tends to top out in late October. We expect a seasonal decline however, if temperatures dip below normal as winter approaches, natural gas prices could move sharply higher. Natural gas remains on short and intermediate term buy signals. We have no recommendation.
The Energy Information announced that working gas in storage was 3,836 Bcf as of Friday, October 14, 2016, according to EIA estimates. This represents a net increase of 77 Bcf from the previous week. Stocks were 46 Bcf higher than last year at this time and 185 Bcf above the five-year average of 3,651 Bcf. At 3,836 Bcf, total working gas is above the five-year historical range.
December gold advanced $7.00 on subdued volume of 149,590 contracts. However, total open interest exploded higher, up 6,554 contracts, which relative to volume is approximately 65% above average meaning that aggressive new buyers were entering the market in substantial numbers and driving prices to a new high for the move (1274.40), which is the highest print since 1279.40 made on October 5.
As this report is being compiled on October 20 the December contract has taken out yesterday’s print with another new high for the move of 1275.90, but currently is trading 2.90 lower on the day while the dollar index moves to a new high for the move on October 20. December gold remains on short and intermediate term sell signals and we recommend a stand aside posture.