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Corn:

December corn advanced 1.50 cents on volume of 294,571 contracts. Total open interest increased by 4,210, which relative to volume is approximately 40% below average. The December contract lost 10,055 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 26, the December contract is trading 3.75 cents higher and has made a new high for the move of 3.85, which is the highest print since 3.86 3/4 made on October 14. Today’s high also takes out the previous print of 3.83 1/2 made on October 22. It appears the catalyst for higher corn prices on October 26 is the sharp rally in Chicago and Kansas City wheat. December corn remains on short and intermediate term sell signals.

Soybeans: January soybeans is close to generating a short term sell signal.

November soybeans lost 3.25 on volume of 297,779 contracts. Total open interest declined by a massive 57,520 contracts, which relative to volume is approximately 600% above average, and this was due to the impending first notice day for the November contract. The November lost 63,931 of open interest.

As this report is being compiled on October 26, the January contract is trading 11.50 cents lower and has made a daily low of 8.82 1/2, which is the lowest print since 8.76 1/2 made on October 9. The January contract is headed for a short-term sell signal, which will reverse the October 14 short-term buy signal. For this to occur, the high of the day must be below OIA’s key pivot point for October 26 of 8.87 1/4. We have no recommendation

Soybean meal: On October 26, December and January soybean meal will generate short-term sell signals, which will reverse the October 14 short-term buy signals.

Live cattle:

December live cattle lost 35 points on volume of 52,700 contracts. Volume increased from October 22 when the December contract gained 60 points on volume of 47,236 contracts and total open interest increased by 2,003. On October 23, total open interest increased by 725 contracts, which relative to volume is approximately 40% below average. We consider the price and open interest action on October 23 to be bearish.

As this report is being compiled on October 26, the December contract is trading 1.35 cents lower and has made a daily low of 1.41050, which is the lowest print since 1.40925 made on October 20. December live cattle remains on a short term buy signal, but an intermediate term sell signal. We recommend a stand aside posture.

Lean hogs: December lean hogs will generate a short-term sell signal on October 26 provided the daily high is below OIA’s key pivot point for October 6 of 64.890. December lean hogs remain on an intermediate term buy signal.

December lean hogs lost 2.85 cents on volume of 54,895 contracts. Total open interest declined by 2,610, which relative to volume is approximately 75% above average meaning liquidation was extremely heavy on the sizable decline. As we pointed out in the weekend report, managed money is heavily net long lean hogs, and there is a substantial amount of liquidation remaining, especially  because it appears likely that December hogs will generate a short-term sell signal on October 26. We have no recommendation.

WTI crude oil:

December WTI crude oil lost 78 cents on volume of 708,127 contracts. Total open interest increased by a sizable 17,729 contracts, which relative to volume is average. October 23 was the third day in a row in which total open interest increased by a sizable amount.

From October 21 through October 23 total open interest increased by a cumulative 56,561 contracts while December WTI has declined by $1.69. This is bearish open interest action relative to the price decline and confirms that short sellers have been piling into the market and driving prices lower.

On October 21, OIA announced that December and January WTI crude oil generated short-term sell signals. December and January WTI remains on intermediate term sell signals. We have no recommendation.

Dollar index: On October 23, the December dollar index generated a short term buy signal, and will likely generate an intermediate term buy signal on October 26.

The December dollar index advanced by a strong 78.9 points on heavy volume of 46,657 contracts. However, total open interest was a major disappointment having increased only 106 contracts, which is minuscule and dramatically below average. Surprisingly, the March contract lost 101 of open interest. On October 22, the December contract gained a massive 1.386 points on volume of 53,076 contracts and total open interest declined by 4,481.

In summary, during the past two sessions, the December contract has advanced a sizable 2.175 points, yet total open interest during the two day period declined by 4,375 contracts. The December contract will generate an intermediate term buy signal provided the daily low on October 26 remains above OIA’s key pivot point of 96.650.

As this report is being compiled on October 26, the December dollar index is having the typical pullback, which usually occurs after the generation of a buy signal. Based upon the open interest stats for the past two days, we think it is likely that a further pullback is in the offing. At this juncture we have no recommendation.

Euro: On October 23, the December euro generated short and intermediate term sell signals.

The December euro lost 1.05 cents on volume of 291,261 contracts. Volume declined from October 22 when the December contract lost 2.29 cents on volume of 393,383 contracts and total open interest increased by 11,864. On October 23, total open interest increased again, this time by 6,634 contracts, which relative to volume is approximately 10% below average, but Friday’s open interest increase on a price decline indicates that short sellers were entering the market in substantial numbers and driving prices to a new low for the move (1.1004). This was the lowest print since 1.0983 made on August 11.

As this report is being compiled on October 26, the December contract is having its usual counter trend rally after the generation of a sell signals, and trading 59 pips higher on the day. We expect the rally to continue for one more day possibly two. At that juncture we will determine whether to recommend bearish positions.

Swiss franc: On October 23, the December Swiss franc generated short and intermediate term sell signals.

The December Swiss franc lost 62 pips on volume of 22,244 contracts. Total open interest declined by a strong 853 contracts, which relative to volume is approximately 25% above average. As this report is being compiled on October 26, the December contract is trading 26 pips lower and has made a new low for the move of 1.0178. We have no recommendation.

Yen: On October 23, the December yen generated a short-term sell signal, but remains on an intermediate term buy signal.

The December yen lost 45 pips on volume of 180,486 contracts. Total open interest increased by 13,052 contracts, which relative to volume is approximately 185% above average meaning huge numbers of new short-sellers were entering the market and driving prices to a new low for the move (.8232). This is the lowest print since .8229 made on August 28. 

From October 16 through October 23, the December yen has declined every day and the cumulative loss during this period has been 182 pips. During this time, total open interest has increased by 8,945 contracts indicating that short sellers are in control. As this report is being compiled on October 26, the yen is experiencing  the typical counter trend rally after a sell signal and trading 29 pips above Friday’s close. We have no recommendation.

10 year treasury Note: The 10 year treasury note is getting close to generating a short-term sell signal and this will occur if the daily high is below OIA’s key pivot point for October 26 of 128-082. The rally will resume if the daily low is above OIA’s pivot point for October 26 of 128-266.

S&P 500 E-mini: On October 23, the December S&P 500 E-mini generated an intermediate term buy signal after generating a short-term buy signal on October 6.

The December S&P 500 E-mini advanced 13.00 points on volume of 2,072,118 contracts. Surprisingly, total open interest declined by a sizable 67,302 contracts, which relative to volume is approximately 15% above average. This follows the total open interest decline on October 22 of 32,080 contracts on volume of 2,104,777 contracts when the December contract advanced by 44.50 points.

During the past two days, it appears we have capitulation by shorts who have finally thrown in the towel. From a seasonal point of view, the market has a strong tendency to rally, but will face potential headwinds from a debt ceiling crisis and a threat of an interest rate increased by the Federal Reserve.Offsetting the potential interest rate rise is the specter of a weakening global economy. At this juncture, we have no recommendation.