December lean hogs lost 2.050 cents on volume of 49,483 contracts. Total open interest increased by massive 4,593 contracts, which relative to volume is approximately 275% above average, and this indicates that aggressive new short-sellers were entering the market and driving prices to a new contract low of 41.100, which breaks below 43.050 lowest price on the monthly continuation chart for the lean hogs contract going back to August 2009. The low made previous to August 2009 of 42.475 on the monthly continuation chart occurred during December 2002. October 2016 hogs made a contract low of 47.62 on October 5 and lost 1,632 of open interest. As this report is being compiled on October 6, the December contract is having a rebound, trading up 1.975 cents on low volume. Stand aside.
WTI crude oil:
November WTI crude oil advanced $1.14 on volume of 1,069,463 contracts. Volume is the strongest since September 29 (when WTI generated short and intermediate term buy signals) and the November contract gained 78 cents on volume of 1,270,531 contracts and total open interest increased by 10,032. On October 5, total open interest increased again, this time by a sizable 37,894 contracts, which relative to volume is approximately 20% above average. The November contract accounted for a loss of 4,837 of open interest.
As this report is being compiled on October 6 the November contract is trading higher again, up 49 cents and has made a new high for the move of 50.51, which is the highest print on the daily continuation chart since 50.45 made on June 24 for the August contract.We continue to recommend a stand aside posture and that clients should NOT be chasing this rally because the fundamentals remain negative and the market is going to have a pullback– it’s just a matter of when this occurs. Do not short crude.The sharply higher dollar is not dampening enthusiasm for crude.
December gold lost $1.10 on volume of 234,725 contracts. Volume fell from October 4 when the December contract lost $43.00 on volume of 382,868 contracts and total open interest declined by 10,523. On October 5, total open interest declined by massive of 21,425 contracts, which relative to volume is approximately 285% above average meaning that liquidation was extremely heavy on the modest decline
From September 27 through October 5, total open interest has declined by 76,574 contracts while the December contract has lost $ 75,50 in this time frame. This week’s COT report, which will be released on Friday will be calculated through Tuesday October 4. Once the report is released, we will have a fix on the extent to which managed money has liquidated long positions.
As this report is being compiled on October 6, the December contract is trading sharply lower again, down $13.20 or -1.04% and has made a new low for the move of 1252.50, which is the lowest print since 1251.30 made on June 8. This has penetrated the 200 day moving average of 1259.90 and the year to date moving average of 1266.60. This is very troubling and because of the damage done to the chart, gold will need to undergo a process of repair before it can again resume its rally. The next potential area of support is 1242.70 made on June 7 and there is major support at the May 31 low of 1207.00. Stand aside.
December silver lost 8.00 cents on volume of 81,199 contracts. Volume declined from October 4 when the December contract lost $1.093 on volume of 111,341 contracts and total open interest declined by 3,230. On October 5, total open interest declined by 3,936 contracts, which relative to volume is approximately 75% above average indicating that liquidation was extremely heavy on yesterday’s modest decline. As this report is being compiled on October 6, the December contract is trading sharply lower again, down 31 cents or -1.78% and has made a new low for the move of $17.140, which is the lowest print since 17.080 made on June 9.
Like gold, December silver is trading below its 200 day and year to date moving averages. Since topping at 21.225 on July 5 through today’s low the December contract has fallen $4.00. Looking at the chart, the strongest area of support appears to be in the low $16.00 area which was support in the late May early June time frame. Continue to stand aside. There is no reason to be involved in silver at this juncture, especially since interest rates are creeping the higher and this is negative for precious metals.
Yen: On October 5, the December yen generated short and intermediate term sell signals. We have no recommendation.
Dollar Index: On September 19, the December Dollar Index generated a short term buy signal and will generate and intermediate term buy signal on October 6.
The December dollar index lost 11 points on volume of 23,996 contracts. Total open interest increased by a massive 1,143 contracts, which relative to volume is approximately 70% above average meaning a battle ensued between buyers and sellers and sellers were able to edge the market slightly lower. As this report is being compiled on October 6, the dollar index is rocketing sharply higher, up 50 points and will generate and intermediate term buy signal on October 6. It is made a new high for the move of 96.665, which is the highest print since 96.500 made on August 5. We have no recommendation.