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Corn:

December corn lost 4.50 cents on surprisingly heavy volume of 374,747 contracts. Volume increased substantially from October 26 when the December contract gained 4.75 cents on volume of 317,435 contracts and total open interest increased by 3,800 contracts. Additionally, volume was the highest since October 21 when the December contract gained 4.00 cents on volume of 409,025 contracts and total open interest declined by 9,217.

On October 27, total open interest declined just 415 contracts. The December contract accounted for loss of 10,184 of open interest, which means there was heavy open interest increases in the forward months to offset most of the decline in the December contract. We consider yesterday’s price and open interest action to be bearish.

Although the December contract made a high of 3.87 1/2, it was unable to hold this and selling pressure sent the market lower. As this report is being compiled on October 28, the December contract is trading 3.25 cents lower and has made a daily low of 3.75 3/4, which is the lowest print since 3.75 made on October 23. December corn remains on short and intermediate term sell signals. We have no recommendation.

Soybeans:

January soybeans advanced 6.50 cents on light volume of 252,175 contracts. Volume fell dramatically from October 26 when the January contract lost 11.50 cents on volume of 371,587 contracts and total open interest declined by 16,316. Additionally, volume was the lightest since October 16 when soybeans lost 7.00 on volume of 256,645 contracts and total open interest declined by 5,379. In short, the lack of volume on yesterday’s advance confirms the weak set up for soybeans.

On October 27, total open interest declined by 1,471 contracts, which relative to volume is approximately 65% below average, however a total open interest decline on yesterday’s price advance also is bearish. The November contract accounted for loss of 15,559 of open interest. There were sufficient open interest increases in the forward months to offset most of the decline in November, but the lack of volume indicates tepid participation.

As this report is being compiled on October 28, the January contract is trading 7.00 cents lower and has made a daily high of 8.91 1/2, which is below yesterday’s print of 8.94 1/4 and a daily low of 8.82 1/2, which is above yesterday’s print of 8.80 1/4. For the January contract to generate a short-term sell signal, the high of the day must be below OIA’s key pivot point for October 28 of 8.86 3/4. With soybean meal on short and intermediate term sell signals and soybean oil likely to generate a short term sell signal during the next couple of days, the prognosis for soybeans is bearish. We have no recommendation

Cocoa: December cocoa is getting close to generating short and intermediate term buy signals and a short-term buy signal will be generated if the daily low is above OIA’s key pivot point for October 28 of $3,195.

Live cattle:

December live cattle lost 1.40 cents on light volume of 45,013 contracts. Total open interest increased by 1,267 contracts, which relative to volume is average, but an open interest increase on yesterday’s price decline is bearish. The October contract lost 608 of open interest, December -105, which means there were sufficient open interest increases in the forward months to offset the decline in these two delivery months and increase total open interest. The price decline in yesterday’s trading was preceded by a loss of 1.40 cents on October 26 on volume of 36,128 contracts while total open interest increased by 1,289.

In summary, market participants were initiating bearish positions during the past two days as prices declined, but they are paying the price for it on October 28 as the December contract is trading limit up and has made a daily high of 1.43600. This is the highest print since 1.43700 made on October 23. We have no recommendation.

From the October 26 report on live cattle:

“Although price and open interest action has been acting a bearish fashion of late, we are not convinced that the move higher is over yet. We have been cautioning clients to maintain a sideline stance, and want to see more evidence that prices have bottomed. Weak hog prices are casting a negative tone upon the livestock markets after being the bulwark of strength. Maintain the sideline stance.”

Lean hogs: On October 28, December lean hogs will generate an intermediate term sell signal after generating a short-term sell signal on October 26.

December lean hogs lost 1.60 cents on light volume of 37,944 contracts. Total open interest declined just 22 contracts. The December contract accounted for loss of 339 of open interest. Surprisingly, liquidation has been light during the sharp decline in prices, which began to accelerate on October 23. According to the most recent COT report, managed money was long by over 3 1/2 to 1. This makes hogs vulnerable to substantial downside from here even though prices have fallen sharply.

As this report is being compiled on October 28, the December contract is trading lower again, this time by 55 points and has made a new low for the move of 60.425, which is the lowest print since 57.825 made on August 24. The chart shows there is no support until the August 24 low. We have no recommendation.

WTI crude oil:

December WTI crude oil lost 78 cents on volume of 630,759 contracts. Total open interest increased by 820 contracts, which is minuscule and dramatically below average. However, this is the fifth total open interest increase in a row. From October 21 through October 27, total open interest has increased by 62,471 contracts while the December contract lost $3.09. This pattern clearly shows that short sellers have been in control.

However, as this report is being compiled on October 28, we are seeing a sharp rally in WTI and the December contract is currently trading $2.53 higher on heavy volume. Although, the EIA report showed an increase of 3.4 million barrels from the previous week, it is likely the rally is due to massive short covering, which is to be expected considering the massive build of open interest on the price declines beginning on October 21. The open interest stats for today’s trading will tell the story and we will provide an analysis of this in tomorrow’s report.

Despite the rally, the December contract is a substantial distance from generating a short-term buy signal and the short-term buy signal would be generated if the daily low is above OIA’s key pivot point for October 28 of $47.23. On October 21, December and January WTI crude oil generated short-term sell signals and have continued to be on intermediate sell status.

Conceivably, we may see another day of rally action, but at this juncture we do not think the market has the strength to move beyond the recent high of 47.97 made on October 16. If total open interest declines on today’s sharp move higher, we may consider recommending bearish positions. For now, stand aside.

The Energy Information Administration announced on October 28 that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 3.4 million barrels from the previous week. At 480.0 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories decreased by 1.1 million barrels last week, but are above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 3.0 million barrels last week but are in the middle of the average range for this time of year. Propane/propylene inventories remain unchanged last week and are well above the upper limit of the average range. Total commercial petroleum inventories decreased by 3.7 million barrels last week.

Canadian dollar: On October 27, the December Canadian dollar generated a short-term sell signal, which reversed the October 5 short-term buy signal. The December Canadian dollar remains on an intermediate term sell signal.

The December Canadian dollar lost 62 pips on volume of 58,817 contracts. Total open interest increased by a massive 4,717 contracts, which relative to volume is approximately 230% above average meaning huge numbers of new short-sellers were entering the market and driving prices lower (75.31). However, on October 28 we are seeing a sharp rally in the Canadian dollar and the December contract is trading 93 pips higher, or + 1.25%. This is typical action after the generation of a short-term sell signal,, and the rally is likely to carry through to tomorrow’s trading. We have no recommendation.

Australian dollar: The December Australian dollar will generate a short term sell signal, which would reverse the short term buy signal of October 7 if the daily high is below OIA’s key pivot point for October 28 of 71.33.

Yen:

The December yen rallied 49 pips on surprisingly light volume of 114,864 contracts. Volume exceeded that of October 26 when the yen advanced 25 pips on volume of 106,744 contracts. In other words, the rally on October 27 was twice that of October 26 and yet volume increased only slightly. The rally on the 27th was the largest since October 14 when the December contract gained 72 pips on volume of 167,962 contracts and total open interest increased by 16,946.

On October 27, total open interest declined by a massive 7,235 contracts, which relative to volume is approximately 140% above average meaning liquidation was extremely heavy on the strong advance. This is not surprising because as the extract from the October 23 report shows, total open interest was building as prices declined. Clearly, in yesterday’s trading, short-sellers were powering the market higher, not new buying. On October 23, OIA announced that the December yen generated a short-term sell signal, but remains on an intermediate term buy signal. We have no recommendation.

From the October 23 report on the yen:

“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.”