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Corn:

December corn advanced 1.00 cent on volume of 207,215 contracts. Total open interest increased by 1,464 contracts, which relative to volume is approximately 60% below average, however the July 2016 contract lost 960 of open interest, which means there were sufficient open interest increases in the front and back months to offset the decline in July and increase total open interest.

As this report is being compiled on October 2, the December contract is trading nearly unchanged on the day and has made a daily high of 3.91 1/2, which is below yesterday’s print of 3.93 and a low of 3.84, which is below yesterday’s print of 3.85. At this juncture,  corn is trading in a sideways pattern with neither the momentum to advance, nor the selling pressure to decline. December corn remains on a short-term buy signal and for an intermediate term buy signal to occur the low of the day must be above OIA’s key pivot point for October 2 of 3.96 3/8. Stand aside.

Chicago wheat: On October 1, December Chicago wheat generated a short-term buy signal, but remains on an intermediate term sell signal.

December Chicago wheat advanced 5.50 cents on volume of 149,247 contracts. Volume increased slightly from September 30 when the December contract gained 9.00 cents on volume of 143,065 contracts and total open interest increased by 1,296. On October 1, total open interest increased by 590 contracts, which relative to volume is approximately 80% below average, but the March 2016 through September 2016 contracts lost 3,170 of open interest, which means there were sufficient open interest increases in the front and back months to offset the decline in these delivery months and increase total open interest.

Although price and open interest action for the past two days have not been barn burner’s, it has been positive. As this report is being compiled on October 2, the December contract is trading 2.50 lower, which is typical after the generation of a short-term buy signal. We would expect the market to further correct before resuming the uptrend. However, we think OIA’s key pivot point of 5.25 5/8 may act as a barrier and the December contract must make a daily low above the pivot point in order to generate an intermediate term buy signal. Yesterday, the December contract made a high of 5.23 3/4 and the high thus far on October 2 has been 5.23. Stand aside.

Soybeans:

From now on, we will report on soybeans only if we announce a signal change, see a trading opportunity, or spot unusual activity.

November soybeans lost 14.75 cents on heavy volume of 288,366 contracts. Volume declined from September 30 when the November contract advanced 7.75 on volume of 297,057 contracts and total open interest increased by 5,309. On October 1, total open interest declined by a sizeable 10,848 contracts, which relative to volume is approximately 30% above average meaning liquidation was substantial on the decline. This is perfectly normal considering there were open interest increases, though modest during advances on September 25 and September 30. The November contract lost 14,558 of open interest on October 1.

As this report is being compiled on October 2, the November contract is trading 1.25 lower and has made a daily high of 8.81 1/2, which is substantially below yesterday’s print of 8.99 1/4. Additionally, the November contract has made a low of 8.68 1/4, which takes out yesterday’s low of 8.76 3/4 and is the lowest print since 8.69 made on September 25.

It appears to us that soybeans are headed lower and the downtrend will resume once the November contract makes a daily high below OIA’s pivot point of 8.69 1/8.. The fact that November soybeans have been unable to generate a short-term buy signal even when the market was making new highs for the move is a warning of internal weakness. For November soybeans to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point for October 2 of 8.85 1/8. Stand aside.

Cocoa:  On October 1, December cocoa generated short and intermediate term sell signals.

This will be our last report on cocoa until we announce a signal change, see a trading opportunity or report on unusual activity.

December cocoa lost $9.00 on volume of 31,678 contracts. Total open interest declined by a substantial 1,345 contracts, which relative to volume is approximately 55% above average. The December contract lost 2,869 of open interest. For the past three days beginning on September 29, total open interest has been declining as prices move lower.

This is a stark contrast to the prior 15 sessions when open interest increased every day regardless of whether prices advanced or declined. Now that December cocoa is on short and intermediate term sell signals, the market should rally from 1-3 days, however we recommend against initiating bearish positions because the fundamentals for cocoa are fairly constructive.

Sugar: On October 1, March 2016 sugar generated an intermediate term buy signal after generating a short-term buy signal on September 28.

March sugar gained 38 points on volume of 151,537 contracts. Total open interest declined by 11,062 contracts, which relative to volume is approximately 185% above average meaning liquidation was extremely heavy on the advance. The October contract lost 23,644 of open interest, and there were sufficient open interest increases in the forward months to cut the October decline in half.

As this report is being compiled on October 2, the March contract is trading 26 points higher and has made a new high for the move but 13.55, which takes out yesterday’s print of 13.27.Since generating a short-term buy signal on September 28, the March contract has not had its typical 1-3 day pullback and instead has rocketed higher blowing out short-sellers along the way. We continue to advise a stand aside posture. Do not chase this market.

WTI crude oil:

November WTI crude oil lost 35 cents on heavy volume of 847,078 contracts. Volume was the strongest since September 17 when WTI lost 25 on volume of 869,744 contracts and total open interest declined by 58,035.On October 1, total open interest increased by 3,644, which relative to volume is approximately 80% below average. The November contract lost 5,915 of open interest. Yesterday, the November contract made a high of 47.10 and a low of 44.63 after the market rocketed higher earlier in the session and then sold off into the close.

As this report is being compiled on October 2, the November contract is trading 68 cents higher as the equity market has turned around from its losses earlier in the session. For the November contract to generate a short-term sell signal, the high of the day must be below OIA’s key pivot point for October 2 of $43.89. The rally will resume if the daily low is above OIA’s pivot point for October 2 of $46.20. Stand aside.

Gold: On October 1, December gold generated a short-term sell signal, which reverses the short-term buy signal of September 25. December gold remains on an intermediate term sell signal.

This will be our last report on gold until we announce a signal change, see a trading opportunity or spot unusual activity.

December gold lost $1.50 on light volume of 86,742 contracts. Total open interest increased by 1,937 contracts, which relative to volume is approximately 10% below average, but a total open interest increase on yesterday’s price decline is bearish.As this report is being compiled on October 2, the December contract is trading $22.10 higher and has made a daily high of $1140.90. A rally is to be expected after the generation of a short-term sell signal, and for December gold to reverse the sell signal, the low of the day must be above OIA’s key pivot point for October 2 of $1135.00. Stand aside.

Dollar index:

The December dollar index lost 15.4 points on volume of 20,443 contracts. Total open interest increased by 675 contracts, which relative to volume is approximately 15% above average meaning new short-sellers were entering the market and driving prices lower. As this report is being compiled on October 2, the December contract is trading 32.1 points lower and has made a daily low of 95.300, which is the lowest print since 95.180 made on September 21.

For the December contract to generate a short-term sell signal, the high of the day must be below OIA’s key pivot point for October 2 of 95.518. The rally will resume if the December contract makes a daily low above OIA’s pivot point for October 2 of 96.307. Stand aside.

Euro:

The December euro advanced 17 pips on volume of 167,703 contracts. Total open interest increased by 2,554 contracts, which relative to volume is approximately 40% below average, but yesterday’s open interest increase on a price advance is constructive. This tempers our bearish enthusiasm for the euro, and as this report is being compiled on October 2, the December contract is trading 40 pips higher after making a new high for the move of 1.1331 as a result of the surprise number in the  US employment report.

This is the highest print since September 24 when the December euro made a high of 1.1311.The high on October 2 is slightly below OIA’s key pivot point for October 2 of 1.1344. In order for a short-term buy signal to occur, which would reverse the short-term sell signal, the low of the day must be above OIA’s key pivot point for October 2 of 1.1344. As we have said in previous reports, we think this is unlikely and that the trend longer-term for the euro is lower.

S&P 500 E-mini:  On October 2, close out the long at the money option straddle in the November and December S&P 500 E-mini because we think the trend has changed on October 2. The purpose of the straddle was to profit from asymmetric downside and we think the risk of this occurring is over for now.

This will be our last report on the S&P 500 E-mini until we announce a signal change, see a trading opportunity or spot unusual activity.

The S&P 500 E-mini advanced 8.00 points on volume of 2,058,629 contracts. Total open interest increased by a minuscule 261 contracts. As this report is being compiled on October 2, the December contract is trading 2.50 points higher after making a low of 1883.00 on the very negative US employment report, but this low is only slightly below yesterday’s print of 1890.25 and is above the September 30 low of 1871.25 and the September 29 print of 1861.00.

The E-mini had every reason to make new lows for the move on October 2 due to the big surprise on the employment report, but has trading robustly higher. Clients should keep in mind that the low for the move of 1831.00 occurred on August 24, and the closest the E-mini has come to breaking that occurred on September 29 (1861.00). Additionally, from a seasonal point of view, equity prices should strengthen as we move deeper into the fourth quarter. In summary, we think the downside has been played out for now.