December live cattle advanced 75 points on volume of 45,351 contracts. Volume increased from October 26 when the December contract gained 50 points on volume of 37,359 contracts and total open interest increased by 1,328. On October 27, total open interest declined by 1,527 contracts, which relative to volume is approximately 25% above average. The October and December 2016 contract lost a total of 3,424 of open interest, which means there were insufficient open interest increases in the forward months to offset the decline in these two delivery months.
As this report is being compiled on October 28, the December contract is trading 30 points above yesterday’s close and has made a daily high of 105.950, which is fractionally above yesterday’s print of 105.750. Ever since December live cattle generated a short term buy signal on October 24, the market has experienced fractional gains on relatively low volume. The December contract has pulled back only once after the generation of the buy signal, when the December contract lost 35 points. We continue to think the cattle market is experience a garden-variety technical rally and look for lower prices ahead and a test the contract low of 96.100 made on October 14.
Soybean meal: December 2016 and January 2017 soybean meal will generate an intermediate term buy signal on October 28 after generating short term buy signals on December 26.
December soybean meal advanced $8.50 on strong volume of 190,907 contracts. Total open interest declined by 2,276 contracts, which relative to volume is approximately 45% below average. The December contract lost 3,870 of open interest, which means there were NOT enough open interest increases in the forward months to offset the decline in December.
During the past two days (October 26 and 27), open interest action relative to the two day price advance has been disappointing to say the least. From October 26 through October 27, December soybean meal advanced $19.40 while total open interest declined by 1,417 contracts. The COT report released last Friday revealed that managed money added 2,780 to their long positions and also added 1,407 to their short positions. Commercial interests added 2,791 to their long positions and liquidated 87 contracts of their short positions. As of this report, managed money was long soybean meal by ratio of 1.44:1, which compares to the ratio in soybeans where managed money is long by ratio of 4.71:1 and soybean oil, which has the highest ratio of longs standing at 7.41:1. No recommendation.
WTI crude oil:
December WTI crude oil advanced 54 cents on light volume of 880,417 contracts. Volume declined substantially from October 26 when the December contract lost 78 cents on volume of 1,111,755 contracts and total open interest increased by 12,757. On October 27, total open interest increased again, this time by 7,134 contracts, which relative to volume is approximately 55% below average, and a total open interest increase on yesterday’s advance is positive. The December contract accounted for a gain of 14,121 of open interest.
As this report is being compiled on October 28. the December contract is trading 59 cents lower and has made a daily low 49.03, which is above yesterday’s print of 49.00 and the October 26 low of 48.87, the low the move. For the December contract generate a short term sell signal, the daily high must be below OIA’s he pivot point for October 28 of $49.36. Stand aside.
10 Year Treasury Note:
The December 10 year note declined by 13.5 points on good volume of 1,584,718 contracts. Total open interest increased by 26,977 contracts, which relative to volume is approximately 25% below average, but a total open interest increase on yesterday’s strong decline is bearish. The December note is on short and intermediate term sell signals and in yesterday’s trading the December contract made a multi-month low of 129-095, which has been taken out on October 28 (129-065), which is the lowest print since 129-0 95 made on May 31, 2016. The 52-week low stands at 128-045. The 10 year note is confirming that interest rates are likely to rise at the Federal Reserve’s December meeting. We have no recommendation at this juncture.