October live cattle advanced 1.15 cents on light volume of 53,176 contracts. Volume was the weakest since August 29 when the October contract lost 1.275 cents on volume of 50,072 contracts and total open interest increased by 532. On September 15, total open interest increased by a massive 3,143 contracts, which relative to volume is approximately 140% above average meaning that aggressive new buyers were entering cattle and driving prices to a new high for the move of 107.500, which is the highest print since 108.450 made on August 31.
As this report is being compiled on September 16, the October contract is advancing 95 points and has made a new high for the move of 108.075. For the past two days, the October contract has gained 2.275 cents while total open interest has increased each day for cumulative total of 3,791 contracts. In yesterday’s report we stated that we thought the market should make an attempt to test the contract low of 99.375 made on September 6, and we would feel more comfortable about the long side of cattle if this test occurred.
At this juncture, we recommend a stand aside posture and the first sign that cattle may have turned will be if it generates a short term buy signal, which will occur if the daily low is above OIA’s key pivot point for September 16 of 107.365. A secondary confirmation of the buy signal would be if the October contract makes a daily low above OIA’s pivot point of 109.930. If the October contract can make a daily low above the secondary pivot point, we would become enthusiastic bulls.
WTI crude oil:
October WTI crude oil advanced 33 cents on strong volume of 1,342,064 contracts. Although volume was below that of September 14 when the October contract lost $1.32 on volume of 1,400,582 contracts and total open interest increased by 26,070, it was above volume traded on September 13, September 12 and September 9.
On September 15 total open interest declined by 18,001 contracts, which relative to volume is approximately 40% below average, and the October contract accounted for a loss of 59,983. As this report is being compiled on September 16, the October contract is trading lower again, down 96 cents and has made a new low for the move of 42.74, which takes out the September 1 print of 43.00. October WTI remains on short and intermediate term sell signals. Stand aside.
December gold lost $8.10 on volume of 229,978 contracts. Total open interest declined by 3,204 contracts, which relative to volume is approximately 50% below average. September 15 marked the six day in a row in which total open interest declined. For the past six sessions beginning on September 8, total open interest has declined every day bringing the cumulative decline to 27,847 contracts. This is a healthy development because of the lopsided long position of managed money, who entered the gold market at the wrong time. Many of these speculators are leaving the party as prices trade at the low end of the three month trading range.
As this report is being compiled on September 16, the December contract is trading $5.60 lower and has made a daily low of 1309.20, which is the lowest print since 1307.40 made on September 2, and is above the low for the entire move of 1305.50 made after the December contract topped that 1384.40 on July 5. Continue to stand aside, but we think it is likely gold is getting close to a bottom.