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Today, Mario Dragi, chief central banker of the ECB announced the likelihood of quantitative easing, and as a result the euro is trading sharply lower and the dollar index sharply higher. This is a major game changer, and likely to be a major turning point for some currencies and  give a boost to global equity markets. We will  provide more detail in tomorrow’s report.

Corn:

December corn advanced 4.00 cents on heavy volume of 409,025 contracts. Volume was the strongest since October 9 when the December contract lost 8.50 cents on volume of 397,649 contracts and total open interest declined by 15,770. On October 21, total open interest declined by 9,217 contracts, which relative to volume is approximately 10% below average, but a total open interest decline on yesterday’s advance is bearish because short-sellers liquidating positions were powering the market higher, not new buying. The December contract lost 25,332 of open interest and May 2016 lost 2924.

Yesterday, December corn made a high of 3.81 and has made another new high on October 22 of 3.83 1/2, but the market has reversed and the December contract is now trading 1.75 lower on the day. For the past two days, we have seen a counter trend rally, which we have been expecting ever since December corn generated a short-term sell signal on October 15. Unless there is a major catalyst to send prices higher, we see prices drifting lower. We have no recommendation.

Soybeans:

November soybeans advanced 9.25 cents on volume of 297,892 contracts. Total open interest increased by 4,576 contracts, which relative to volume is approximately 40% below average, however the November contract lost 10,934 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in November and increase total open interest.

Yesterday’s price and open interest action was positive. As we pointed out in previous reports, soybeans have experienced a series of days positive open interest action on price advances and declines. However, soybeans need a catalyst to propel prices substantially higher.

As this report is being compiled on October 22, the November contract is trading 3.50 lower after making a daily high of 9.13, which is the highest print since 9.15 3/4 made on October 5. November and January soybeans remain on short term buy signals, but intermediate term sell signals. We have no recommendation.

Soybean oil:

December soybean oil advanced 52 points on heavy volume of 177,229 contracts. Volume exceeded that of October 13 when the December contract gained 61 points on volume of 145,568 contracts and total open interest increased by 7,252. On October 21, total open interest increased by 4,217 contracts, which relative to volume is average. The December and January 2016 contracts lost a total of 1,837 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in the two delivery months and increase total open interest.

Though yesterday’s action was positive, the December contract has been unable to generate an intermediate term buy signal, which would occur when the daily low is above OIA’s key pivot point for October 22 of 29.75. As this report is being compiled on October 22, the December contract is trading 35 points lower after making a daily high of 29.48, which takes out yesterday’s print of 29.45. December soybean oil remains on a short-term buy signal. We have no recommendation.

Live cattle:

December live cattle lost 2.5 points on lighter than usual volume of 47,237 contracts. However, total open interest declined by a massive 2,715 contracts, which relative to volume is approximately 130% above average meaning liquidation was extremely heavy on the narrow range day and fractionally lower close. The October, December and February contracts lost a total of 3,907 of open interest.

The pattern of liquidation has continued for the third day in a row and from October 19 through October 21, December live cattle has advanced 3.725 cents while total open interest has declined by 8,121 contracts.

Yesterday, the December contract made a high of 1.43700, which was below the high for the move of 1.43900 made on October 20. As this report is being compiled on October 22, the December contract is trading unchanged on the day and thus far it has been an inside day. We continue to recommend a stand aside posture. December live cattle generated a short-term buy signal on October 19, but remains on an intermediate term sell signal.

Coffee: On October 21, December coffee generated an intermediate term sell signal and will generate a short-term sell signal on October 22.

December coffee lost 3.75 cents on volume of 26,312 contracts. Total open interest increased by 1,484 contracts, which relative to volume is approximately 120% above average meaning aggressive new short-sellers were entering the coffee market in large numbers and driving prices lower (1.2055).

From October 16 through October 21, December coffee has lost 12.70 cents while total open interest has increased each day for cumulative total of 7,146 contracts. During 2015, coffee has generated three buy signals and all have been reversed with in a couple of weeks.

We think there is a true bull market in coffee down the road, and the key is to watch the spread action for the first clue that coffee may be in the process of generating a sustained bull market. We have no idea when this will happen, but clients should monitor spreads because often they foretell the future direction of the market. Stand aside.

WTI crude oil: On October 21, December and January WTI crude oil generated short-term sell signals, which reversed the September 3 short term buy signals. December and January WTI remain on intermediate term sell signals.

December WTI crude oil lost $1.09 on surprisingly light volume of 639,961 contracts. Volume was substantially less than October 20 when the December contract gained 1 cent on volume of 683,026 contracts and total open interest declined by 7,647. On October 21, total open interest increased by a massive 23,376 contracts, which relative to volume is approximately 20% above average meaning aggressive new short-sellers were entering the market in very large numbers and driving prices to a new low for the move (44.86). The November contract accounted for loss of just 66 of open interest.

Yesterday’s price and open interest action is the most bearish we have seen in quite some time and prior to yesterday, price and open interest has been fairly positive, even though price action was unimpressive. As this report is being compiled on October 22, the December contract is trading unchanged on the day after making a high of 46.10, which is only fractionally above yesterday’s print 46.08. The market looks weak, but it should have its usual counter trend rally now that the short term sell signal has been generated. We have no recommendation.

Brent crude oil: On October 21, December and January Brent crude oil generated short-term sell signals, which reversed the October 7 short-term buy signals. December and January Brent crude oil remain on intermediate term sell signals.

December Brent crude oil lost 86 cents on volume of 578,076 contracts. Total open interest increased by 12,258 contracts, which relative to volume is approximately 15% below average. The December contract lost 5,042 of open interest. On October 20, total open interest increased by a massive 37,636 contracts while the December contract gained 9 cents. As this report is being compiled on October 22, the December contract is trading 7 cents lower and has made a daily low of 47.74, which is above yesterday’s print of 47.50. We have no recommendation.

Gold:

December gold lost $10.40 on light volume of 125,414 contracts. Total open interest declined by 3,435 contracts, which relative to volume is average. As this report is being compiled on October 22, with the dollar index trading sharply higher, up 1.217, or +1.28%, the December gold contract is trading 50 cents lower on the day.

Yesterday, the December contract made a low of 1163.20 and the low thus far on October 22 has been 1161.40. In summary, the gold performance is steady in the face of the sharply higher dollar index. This is fairly impressive, however we want to see more action in gold before getting on the back of the bull. December gold remains on short and intermediate term buy signals. At this juncture, we have no recommendation.

Silver:

December silver lost 20.7 cents on volume of 45,920 contracts. Total open interest declined by 1,066 contracts, which relative to volume is approximately 10% below average. A total open interest decline accompanying lower prices is positive, especially when silver is on short and intermediate term buy signals.

As this report is being compiled on October 22, the December contract is trading 12.5 cents higher and has made a daily low of $15.640, which is above yesterday’s print of 15.610. In summary, the market, which closed at 15.710 has not taken out yesterday’s low throughout the evening session of October 21 and through most of the day session thus far.

This is especially impressive considering the very strong performance of the dollar index. Currently, December silver is trading 0.83% higher, while December gold is trading -0.04%. Like gold, we are not willing to get on the back of the bull as yet, but are becoming more friendly to the market as time goes by. At this juncture we have no recommendation.

Euro:

The December euro closed unchanged on October 21 on volume of 117,529 contracts. Total open interest increased by 1,517 contracts, which relative to volume is approximately 45% below average. Based upon yesterday’s open interest action, there was a battle between buyers and sellers and neither side was able to move the market by the close.

However, on October 22 we are seeing a vastly different story with the December euro trading 2.11 cents lower and making a new low for the move of $1.1126, which is the lowest print since $1.1130 made on September 25. The low for the past two months occurred on September 3 when the December contract printed 1.1106. There were a couple of attempts to break below this, but they were unsuccessful and the market has been in a rally mode for most of October.

It is more than likely that a short-term sell signal will be generated in tomorrow’s trading, and conceivably an intermediate term sell signal as well.  Today’s key pivot point for the generation of a sell signal is 1.1244 and for an intermediate term sell signal, $1.1149. Once sell signals are generated, we will be looking for a countertrend rally, and this will be the opportunity to initiate bearish positions. The ECB is determined to expand its quantitative easing program and this will weaken the euro further. At this juncture, we have no recommendation.