10 Year Treasury note: On September 27, the December 10 year treasury note generated a short term buy signal, but remains on an intermediate term sell signal. We have no recommendation.
December live cattle closed down the 3.00 cent limit on total volume of 61,571 contracts. Total open interest increased by a substantial 2,155 contracts, which relative to volume is approximately 25% above average indicating that new short-sellers were entering the market and driving prices lower (103.125). The October contract lost 1,124 of open interest, which means there were more than enough open interest increases in the forward months to offset the decline in October and increase total open interest substantially.
As this report is being compiled on September 28, the December contract is trading 30 points above yesterday’s close and has made a daily low of 101.550 which is slightly above the contract low of 101.275 made on September 6.We recommend a stand aside posture and for live cattle to put in a significant bottom, managed money needs to assume a net short position. According to the latest COT report managed money is long live cattle by a ratio of 1.44:1.
WTI crude oil:
November WTI crude oil lost $1.26 on volume of 999,742 contracts. Total open interest declined only 4,200 contracts, which relative to volume is approximately 75% below average. The November contract accounted for a loss of 8,319 of open interest. As this report is being compiled after the release of the EIA storage report, the November contract is trading 92 cents above yesterday’s close and has made a daily high of 45.89, which is below yesterday’s print of 45.96 and a low of 44.35, which is above yesterday’s print of 44.19. November WTI remains on short and intermediate term sell signals. Stand aside.
The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.9 million barrels from the previous week. At 502.7 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories increased by 2.0 million barrels last week, and are above the upper limit of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories decreased by 1.9 million barrels last week but are above the upper limit of the average range for this time of year. Propane/propylene inventories rose 1.5 million barrels last week and are above the upper limit of the average range. Total commercial petroleum inventories remained unchanged from last week.
November natural gas lost 5 ticks on light volume of 323,841 contracts. However, total open interest declined by a sizable 10,973 contracts, which relative to volume is approximately 20% above average. The October contract accounted for a loss of 14,569 of open interest. As this report is being compiled on September 28, the November contract is trading sharply lower, down 10.2 cents or -3.34% and is trading on the lows of the day.
In yesterday’s research note we cautioned clients to have their exit points in place in the event that natural gas had a substantial pullback and we are seeing this today. The problem with natural gas is that managed money has become heavily net long and according to last Friday’s COT report managed money was long natural gas by ratio of 1.69:1. Based upon the action of late last week and early this week, the net long position has likely increased. As a consequence, there is a reserve of substantial selling pressure from late to the party longs. Stand aside.
From the September 26 research note on natural gas:
“While we are bullish natural gas, the November contract is trading at the upper end of its range going back to mid-May 2015. Although there is a seasonal tendency for prices to rise in the September and October time frame, we think the strong action in natgas will be this winter, especially if temperatures fall to lower than anticipated levels. Natural gas remains on short and intermediate term buy signals and we advise any client long the market to have appropriate exit points in place in the event of an extended pullback.”
December gold lost $13.70 on substantial volume of 217,693 contracts. Volume exceeded that of September 22 when the December contract gained 13.30 on volume of 181,419 contracts and total open interest increased by 10,066 contracts. Also, volume was below that of September 21 when the December contract gained 13.20 on volume of 285,602 and to and total open interest increased by 17,955.
On September 27, total open interest declined by a massive and 16,812 contracts, which relative to volume is approximately 210% above average meaning liquidation was heavy as prices fell to a new low for the move of 1327.70. As this report is being compiled on September 28 the December contract is trading lower again, down 6.20 on low volume. Stand aside.
From the September 26 research note on gold:
“Our concern is there has not been a catalyst to move gold prices higher. During the past couple of days there has been heightened anxiety over the potential financial troubles at Deutsche Bank and its potential contagion effect on global financial markets. Yet during this time, gold has barely rallied and has traded in a sideways to lower pattern.”