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Soybeans:

January soybeans advanced 19.50 cents on heavy volume of 339,471 contracts. Volume was the strongest since October 15 when soybeans lost 12.25 cents on volume of 336,580 contracts and total open interest declined by 2,336 contracts. On October 21, total open interest declined by 8,518 contracts, which relative to volume is average. The November contract accounted for loss of 12,168 of open interest. As this report is being compiled on October 22, January soybeans are trading 11.50 higher and have made a new high for the move at 9.90, which is the highest print since 9.94 1/2 made on September 18.

The decline of open interest on yesterday’s advance on heavy volume is negative. Unfortunately, this is part of a pattern.On October 16, January soybeans advanced 13.25 cents on volume of 236,195 contracts and total open interest increased by only 1,212 contracts, which was 75% below average. On October 14, soybeans advanced 19.50 cents on volume of 402,225 contracts and total open interest declined by 9,432 contracts. In short advances thus far have been characterized by negative or barely positive open interest action.

Previously we have advised writing out of the money calls in the January contract on any good-sized rally, and the market has had that. If the position has already been initiated, stay with it until January soybeans make a daily low above OIA’s key pivot point for October 22 of 9.77 3/4, which would generate a short-term buy signal. Soybean meal is the leader and has been powering soybeans higher. Soybeans remain on a short and intermediate term sell signal.

Soybean meal: 

December soybean meal advanced $13.50 on heavy volume of 119,942 contracts. Volume was the strongest since October 16 when December soybean meal advanced 7.30 on volume of 127,084 contracts and total open interest declined by 3,798 contracts. On October 21, total open interest declined by 2,818 contracts, which relative to volume is approximately 10% less than average. The December contract lost 4,027 of open interest and there were insufficient open interest increases in the forward months to offset the decline in December. We view yesterday’s action as negative.

However, as this report is being compiled on October 22, December soybean meal is trading down 6.50 December soybean meal has made a new high for the move at 353.60, which is the highest print since 358.80 made on September 3. On October 16, December soybean meal generated a short-term buy signal. The market is massively overbought, which makes it vulnerable to a very sharp correction, and therefore we recommend a stand aside posture.

Corn:

December corn advanced 7.75 cents on volume of 247,581 contracts. Volume increased substantially from October 20 when December corn advanced 0.25 cent on volume of 204,161 contracts and total open interest increased by 12,135 contracts. On October 21, open interest increased again, this time by 5,093 contracts, which relative to volume is approximately 20% less than average. The December contract accounted for loss of 11,635 of open interest, which makes the total open interest increase more impressive (bullish).

As this report is being compiled on October 22, December corn is trading 0.75 cent higher after making a new high for the move at 3.61, which is the highest print since 3.62 3/4 made on September 3. In previous reports, we recommended abandoning the short call position in corn if the low of the day was above OIA’s key pivot point of 3.49 5/8, and it appears that today’s low of 3.52 1/4 will hold. For the rally to continue, the next key pivot point for October 22 is 3.58, and December corn must make a low above it. After this: OIA’s key pivot point for the generation of an intermediate term buy signal of 3.65 1/2.

Chicago wheat:

December Chicago wheat advanced 5.75 cents on volume of 87,629 contracts. Volume was the strongest since October 10 when December wheat advanced 5.25 cents on volume of 112,735 contracts and total open interest increased just 51 contracts. On October 21, total open interest increased by a massive 5,008 contracts, which relative to volume is approximately 125% above average meaning that aggressive new longs were entering the market in heavy numbers and driving prices to a new high for the move (5.23 3/4). The December contract lost just 82 of open interest. As this report is being compiled on October 22,  December Chicago wheat is trading 3.00 cents higher and has made a new high for the move at 5.28 3/4, which is the highest print since 5.29 1/4 made on September 10. On October 17, December Chicago wheat generated a short-term buy signal. We much prefer the fundamentals of Kansas City wheat.

From the October 20 report:

“In order for December Chicago wheat to continue its advance, it must make a low above OIA’s key pivot point for October 21 of 5.28 5/8. If it is unable to do so, that may be the extent of the rally, at least for now.”

Kansas City wheat:

December Kansas City wheat advanced 1.50 cents on volume of 22,388 contracts. Total open interest declined by 802 contracts, which relative to volume is approximately 40% above average meaning that liquidation was fairly substantial considering the narrowly traded range.The December contract accounted for loss of 1469 of open interest.The December 2014-May 2015 spread lost 2 1/2 cents. As this report is being compiled on October 22, December Kansas City wheat is trading 8.25 cents higher and has made a daily high of 6.12, which is below the high of 6.14 3/4 made on October 17. Additionally, the December 2014-May 2015 spread is widening. Continue to hold the spread.

WTI crude oil:

December WTI crude oil advanced 58 cents on volume of 549,236 contracts. Total open interest declined by a strong 23,574 contracts, which relative to volume is approximately 55% above average meaning that liquidation was extremely heavy on the modest advance. The November contract accounted for loss of 17,103 of open interest.As this report is being compiled after the release of the EIA report, December WTI is trading 64 cents lower and has made a daily low of 81.02, which takes out yesterday’s low of 81.57. Stand aside.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 7.1 million barrels from the previous week. At 377.7 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 1.3 million barrels last week, and are in the lower half of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories increased by 1.0 million barrels last week but are in the lower half of the average range for this time of year. Propane/propylene inventories rose 0.2 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories increased by 4.4 million barrels last week.

Natural gas:

November natural gas advanced 4.1 cents on volume of 239,887 contracts. Total open interest declined by a massive 12,366 contracts, which relative to volume is approximately 105% above average meaning that liquidation was extremely heavy on the modest advance. The November contract accounted for loss of 11,679 of open interest. For the past several days, open interest action relative to price has been acting in a very negative manner. It appears the only hope for natural gas is a cold snap, which would begin to reduce inventories. On October 10, November and December natural gas generated a short-term sell signals and remain on an intermediate term sell signals. Stand aside.

Gold: On October 21, December gold generated a short-term buy signal, but remains on an intermediate term sell signal.

December gold advanced $7.00 on volume of 173,210 contracts. Volume was the strongest since October 16 when December gold lost 3.60 on volume of 184,412 contracts and total open interest declined by 362 contracts. On October 21, total open interest increased by healthy 3,598 contracts, which relative to volume is approximately 20% below average. However, this is the 2nd day in a row that prices have advanced along with open interest. As this report is being compiled on October 22, December gold is trading 6.40 lower and has made a daily low of 1241.60. After the generation of a buy signal, the market has a tendency to pullback from 1-3 days, and this is the opportunity to initiate bullish positions.However, as we said in yesterday’s report: our major concern is that platinum and silver remain on short and intermediate term sell signals. 

Cocoa:

December cocoa lost $10.00 on light volume of 13,626 contracts. Total open interest increased by just 74 contracts. The December contract lost 615 of open interest. The March 2015-December 2015 spread lost 7.00. As this report is being compiled on October 22, December cocoa is closed at 3,113, up $3.00. Maintain the March 2015-December 2015 spread and the long call position in the March contract. As we said in yesterday’s report: “December and March cocoa remain on a short and intermediate term sell signal, and the basis of the trade is the potential spread of the Ebola virus to the Ivory Coast and Ghana and its potential negative impact on cocoa distribution.”

If the threat of the virus diminishes, we expect cocoa to continued its trend lower.

Coffee:

December coffee advanced 20 ticks on heavy volume of 30,677 contracts.Volume was the strongest since October 6 when December coffee advanced 14.30 cents on volume of 35,376 contracts and total open interest increased by 450 contracts. On October 21, total open interest increased by 1,212 contracts, which relative to volume is approximately 55% above average meaning a battle ensued between longs and shorts, and by the end of the day the market moved only fractionally higher. The December contract accounted for loss of 1,623 of open interest. Yesterday, it appeared that trade selling was driving prices lower, and this has been the case ever since the market topped out in mid October.The problem with coffee is the large numbers of speculative longs in the market, and they are refusing to liquidate even though some of them are undoubtedly receiving margin calls.

As this report is being compiled on October 22, December coffee has closed 8.50 cents lower at 1.9110, which is slightly below the close of 1.9125 made on September 29.December coffee did not generate a short-term sell signal yesterday because the high of 2.0130 was above OIA’s key pivot point for October 21. For December coffee to generate a short-term sell signal, the high in the December contract must be below OIA’s key pivot point for October 22 of 1.9860. It appears highly likely a short-term sell signal will be generated, and the central question is: how much lower does coffee go before it blows out a good portion of speculative longs.