This week is likely to be potentially tumultuous due to the meeting and subsequent press conference by the Federal Reserves and the announcement by the Japanese central bank of any potential quantitative easing measures. We recommend a sideline stance for any new position (s). Wait until after the announcements by both central banks before entering new positions.
December live cattle lost 70 points on volume of 50,388 contracts. Total open interest declined by 270 contracts, which relative to volume is approximately 75% below average. As this report is being compiled on September 20, the December contract is trading 50 points lower. For the December contract to generate a short term buy signal, the low of the day must be above OIA’s key pivot point for September 20 of 108.110. Stand aside.
December gold advanced $7.60 on light volume of 140,481 contracts. Total open interest declined again for the eighth time in a row and lost 468 contracts, which relative to volume is approximately 85% below average, but the total open interest declined on yesterday’s advance confirms the liquidation cycle in the gold market. For the past eight sessions beginning on September 8, total open interest has declined every day bringing the cumulative decline to 33,395 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 20 the December contract is trading unchanged on the day and has made a daily low of 1315.20, which is above yesterday’s print of 1312.60 and a daily high of 1321.10, which is below yesterday’s print of 1321.80. On September 16, OIA announced that December gold generated a short term sell signal, but it remains on an intermediate term buy signal. We continue to recommend a sideline stance, especially since the Japanese central bank will be making announcements regarding its quantitative easing program and the Federal Reserve will release its minutes of its two-day meeting tomorrow.
Unlike gold, silver advanced strongly and the December contract gained 42.8 cents on surprisingly light volume of 50,214 contracts. However, total open interest exploded higher, up by 2,109 contracts, which relative to volume is approximately 65% above average meaning aggressive new buyers is were entering the silver market in large numbers and driving prices higher (19.380). As this report is being compiled on September 20, the December contract is trading 1.5 cents lower on the day and has made a daily high below yesterday’s print. Like gold, we continue to recommend a stand aside posture.
Dollar index: On September 19, the December dollar index generated a short term buy signal, but remains on an intermediate term sell signal. Due to upcoming announcements by the Japanese central-bank and the Federal Reserve, this signal could easily reverse.