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The Dollar index will generate a short-term buy signal on October 23 and likely an intermediate term sell signal on Monday. The implications of this dramatic change is bearish for commodities across the board. We expect the dollar index to test the highs made during March 2015 (100.715).

Corn:

December corn lost 2.50 cents on volume of 209,255 contracts. Total open interest increased by 1,614 contracts, which relative to volume is approximately 55% below average, but a total open interest increase on yesterday’s decline is bearish. Additionally, the December contract lost 10,821 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in December and increase total open interest.

As this report is being compiled on October 23, the December contract is trading 2.25 cents lower on the day and has made a daily low of 3.75, which is the lowest print since 3.72 made on October 20. As we pointed out in yesterday’s report, the corn market needs a catalyst to send prices higher, and as it stands, we expect prices to drift lower and test contract lows. The upcoming COT report will reveal the extent to which managed money has increased their bearish positions. Corn remains on short and intermediate sell signals. We have no recommendation.

Soybeans:

November soybeans lost 6.50 cents on heavy volume of 343,139 contracts. Volume was the strongest since October 13 when the November contract gained 26.50 cents on volume of 431,836 contracts and total open interest increased by 17,277. On October 22, total open interest declined by 5,677 contracts, which relative to volume is approximately 35% less than average. The November contract lost 12,694 of open interest. Soybeans continue to display positive open interest action relative to price advances and declines, but price action is lackluster.

The soybean meal contract is displaying bearish open interest action and in yesterday’s trading, the December contract declined $2.70 and total open interest increased by 1,281 contracts. Although the soybean oil contract is trading somewhat more favorably, it has been unable to generate an intermediate term buy signal. Like corn, soybeans need a catalyst to send prices substantially higher, and this is not on the horizon.

As this report is being compiled on October 23, the November contract is trading 5.50 cents lower and has made a low of 8.92, which is the lowest print since 8.89 1/2 made on October 20. November and January soybeans remain on short term buy signals, but intermediate term sell signals. We have no recommendation.

Live cattle:

December live cattle advanced 60 points on volume of 47,236 contracts. Total open interest increased by a massive 2,003 contracts, which relative to volume is approximately 70% above average meaning a battle ensued between buyers and sellers and buyers were able to move the market fractionally higher. The October and December contracts lost a total of 566 of open interest.

Yesterday, the December contract made a fractional new high for the move of 1.43925, which takes out the previous high of 1.43 900 made on October 20. As this report is being compiled on October 23, the December contract is trading sharply lower, down 1.875 cents and has made a daily low of 1.41125, which is the lowest print since 1.40925 made on October 20.It would be a positive if open interest declines in today’s trading.

On October 19, December live cattle generated a short-term buy signal, but has been unable to generate an intermediate term buy signal. We have cautioned clients to remain on the sidelines until a substantial pullback in cattle occurred, and today is the first day of corrective activity since the October 19 buy signal. Continue to stand aside. We think it is highly likely the December contract will test our pivot point of 1.39455.

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

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

December coffee lost 1.15 cents on volume of 24,208 contracts. Total open interest increased by a massive 2,055 contracts, which relative to volume is approximately 230% above average meaning aggressive new short-sellers were entering the market and driving prices to a new low for the move of 1.1975. As this report is being compiled on October 23, the December contract is trading 1.25 cents lower on the day and has made another new low of 1.1755. We have no recommendation

WTI crude oil:

December WTI crude oil advanced 18 cents on light volume of 583,869 contracts. Total open interest increased by a strong 15,456 contracts, which relative to volume is average. The November contract lost 230 of open interest. October 22 is the second day in a row in which open interest increased substantially. On October 21 the December contract lost $1.09 on volume of 639,961 contracts and total open interest increased by 23,376 contracts.

As this report is being compiled on October 23, the December contract is trading 59 lower and has made a new low for the move of 44.20, which is the lowest print since 44.31 made on September 24. Currently, the December contract is trading approximately $5.58 above its contract low of 39.22 made on August 24. On October 21, the December and January contract generated short-term sell signals and remain on intermediate term sell signals. We have no recommendation.

Dollar index: The December dollar index will generate a short-term buy signal on October 23, but not an intermediate term buy signal. We anticipate the intermediate term buy signal will occur on Monday.

The December dollar index advanced by a sizable 1.386 points on heavy volume of 53,076 contracts. Surprisingly, total open interest declined by a massive 4,481 contracts, which relative to volume is approximately 230% above average meaning massive numbers of participants were covering short positions and liquidating long positions as the market made a new high for the move of 96.500.

As this report is being compiled on October 23, the dollar index is trading sharply higher again, up by 68.6 points and has made another new high for the move of 97.190, which is the highest print since 96.920 made on September 3. For an intermediate term buy signal to occur, the low of the day must be above OIA’s key pivot point for October 23 of 96.638 and the low thus far on October 23 has been 96.225. We have no recommendation.

Euro: The December euro will generate short and intermediate term sell signals on October 23.

The December euro lost 2.29 cents on heavy volume of 393,383 contracts. Total open interest increased by a sizable 11,864 contracts, which relative to volume is approximately 10% above average meaning that aggressive new short-sellers were entering the market in substantial numbers and driving prices to a new low for the move of 1.1109. The catalyst for yesterday’s sharp selloff were comments by the head of the ECB, Mario Dragi, who confirmed that quantitative easing would likely be expanded and these comments sent the euro into a tailspin.

Although, we thought the market might rally after yesterday’s debacle, the carnage continues on October 23 and the December contract is currently trading 1.03 cents lower and has made a new low for the move of 1.1011, which is the lowest print since 1.0983 made on August 11. Now that the euro is on short and intermediate term sell signals, it is overdue for a good sized counter trend rally, and this will be the opportunity to initiate bearish positions. Wait for the rally before considering bearish positions.

Swiss franc: The December Swiss franc will generate short and intermediate term sell signals on October 23.

The December Swiss franc lost 1.62 cents on volume of 28,615 contracts. Total open interest declined by 326 contracts, which relative to volume is approximately 45% below average. As this report is being compiled on October 23, the December contract is trading 56 pips lower, or -0.54% versus the euro trading -0.89%. We have no recommendation.

S&P 500 E-mini: The December S&P 500 E-mini will generate an intermediate term buy signal on October 23 after generating a short-term buy signal on October 6.

The December S&P 500 E-mini advanced 44.50 points on heavy volume of 2,104,777 contracts. Total open interest declined by 32,080 contracts, which relative to volume is approximately 40% below average, but yesterday’s open interest decline on a very strong advance indicates that short sellers were powering the market higher, not new buyers.

At this juncture, it appears that the path of least resistance is higher, however there are two important points to consider: 1) The debt ceiling issue which will surface next week has a deadline in early November. Failing to raise the debt ceiling, which would enable past bills to be paid could create a crisis atmosphere. 2) It appears that the global equity markets are stabilizing for now, and with a robust US stock market and some good earnings reports, the Federal Reserve may become emboldened about raising interest rates, this December.

With the ECB expanding quantitative easing and the very real possibility of Japan embarking upon a new quantitative easing program, the Federal Reserve may feel more comfortable about doing the one thing they have wanted to do all year: raise interest rates. We have no recommendation.