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Corn:

December corn lost 4.00 cents on volume of 271,300 contracts. Volume declined substantially from October 27 when the December contract lost 4.50 cents on volume of 374,747 contracts and total open interest declined by 415. Additionally, volume was the lightest since October 22 when the December contract lost 2.50 cents on volume of 209,255 contracts and total open interest increased by 614.

On October 28, total open interest increased by a massive 10,667 contracts, which relative to volume is approximately 45% above average meaning aggressive new short-sellers were entering the market in very large numbers and driving prices lower (3.75 3/4). The December contract lost 875 of open interest, September 2016 -1,888, 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 by a substantial number.

Yesterday’s action confirms the bearish set up for corn. As this report is being compiled on October 29, the December contract is trading 3.25 cents above yesterday’s close and has made a daily high of 3.80 1/2, which is below yesterday’s print of 3.80 3/4. December corn remains on short and intermediate term sell signals. We have no recommendation.

Soybeans: January soybeans will generate a short-term sell signal on October 29 if the daily high remains below OIA’s key pivot point for October 29 of 8.86 3/4. This will reverse the short term buy signal of October 14. January soybeans remain on an intermediate term sell signal.

January soybeans lost 8.50 cents on volume of 309,918 contracts. Volume surpassed that of October 27 when the January contract gained 6.50 cents on volume of 252,175 contracts and total open interest declined by 1,471. On October 28, total open interest declined by 8,641, which relative to volume is average. The November contract accounted for loss of 26,885 of open interest, which means that there were sufficient open interest increases in the forward months to reduce the impact of the loss in the November contract. Yesterday’s action was bearish, and as this report is being compiled on October 29, the January contract is trading 1.50 cents lower after making a new low for the move of 8.75 1/2, which is the lowest print since 8.76 1/4 made on October 5.

With soybean meal on short and intermediate term sell signals and soybean oil near a short-term sell signal, the direction for the soybean complex is lower. We have no recommendation.

Live cattle:

December live cattle advanced the 3.00 cent daily limit on unimpressive volume of 53,924 contracts. Volume was the highest since October 23 when the December contract lost 35 points on volume of 52,700 contracts and total open interest increased by 725. Volume may have been suppressed due to the nearby months being locked limit up for a good portion of the session.

However, on October 28, total open interest declined by 123 contracts, and there is nothing positive about this. The October contract lost 349 of open interest and surprisingly, the December contract lost 2,028, another major negative. Almost without exception, total open interest action relative to price advances and declines has been consistently bearish meaning it increases on price declines and declines when prices advance.

As this report is being compiled on October 28, the December contract is trading 95 points lower after making a new high for the move of 1.44 725, which is the highest print since 1.44 350 made on September 11. On October 19, OIA announced that December live cattle generated a short-term buy signal, and currently remains on an intermediate term sell signal. With open interest action acting in a negative manner, we recommend standing aside even though the seasonal trend favors higher prices. In our view, the market could reverse at any time, or continue to advance, which makes it a bad candidate for bearish or bullish positions.

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

December lean hogs gained 15 points on volume of 35,346 contracts. Total open interest increased by 1,041 contracts, which relative to volume is approximately 5% above average. The December contract lost 870 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 by an average amount. The action in yesterday’s trading was bearish even though the market was able to close positively, however, it spent most of the day lower.

As this report is being compiled on October 29, the December contract is trading lower again, this time by 90 points or -1.47% and has made a new low for the move of 59.775, which is the lowest print since 57.825 made on August 24. There is no support on the charts until we reach the August 24 low. As pointed out in yesterday’s report, 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, because liquidation has been light even though prices have fallen sharply.

Cocoa: December cocoa will generate a short-term buy signal if it makes a daily low above OIA’s key pivot point for October 29 of $3,197.

WTI crude oil:

December WTI crude oil rose sharply yesterday, gaining $2.74 on heavy or the normal volume of 865,635 contracts. Volume was the strongest since October 15 when WTI gained 23 cents on volume of 893,410 contracts and total open interest declined by 21,833. On October 28, total open interest increased just 11,416 contracts, which relative to volume is approximately 45% below average. The December contract lost 5,892 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. Given that open interest declined in the December contract when it is the lead month on a very strong advance is negative.

As this report is being compiled on October 29, the December contract is trading 11 cents lower after making a intra-day high of $46.79, which is the highest print since 46.93 made on October 20. As we pointed out in yesterday’s report (extract below), we thought the market would rally for another day, but does not have the momentum to make a move beyond the October 16 high of 47.97.

Unfortunately, total open interest did not decline in the rally, which would have been the set-up for bearish positions. Even though total open interest was substantially below average, we recommend a sideline stance until we see more indications the market has run out of steam. Additionally, total open interest increased in the Brent contract and had much better performance stats than WTI.

With respect to the products, December gasoline advanced 6.01 cents on volume of 154,606 contracts, but total open interest declined by a massive amount, -7535, which relative to volume is approximately 75% above average meaning liquidation was extremely heavy on yesterday’s advance

Heating oil fared somewhat better having gained 5.85 cents on volume of 178,147 contracts and total open interest increased by 1,319 contracts, which relative to volume is approximately 60% below average. Both gasoline and heating oil remain on short and intermediate term sell signals,  and this means that WTI is not getting support from the products.

For WTI to advance substantially, it must generate a short-term buy signal, and for this to occur the daily low must be above OIA’s key pivot point for October 29 of $47.24. Continue to stand aside.

From the October 27 report on WTI crude oil:

“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.”

Brent crude oil:

December Brent crude oil advanced $2.24 on volume of 729,931 contracts. Total open interest increased by 14,427 contracts, which relative to volume is approximately 20% below average, however the December contract lost 11,223 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 29, the December contract is trading 17 cents lower on the day and has made a daily high of 49.38, which is only slightly above yesterday’s print of 49.23. For the December Brent contract to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point for October 29 of $50.04. We have no recommendation.

Gold: December gold 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 29 of $1152.00.

December gold advanced $10.30 on heavy volume of 198,732 contracts. Total open interest increased by 4,059 contracts, which relative to volume is approximately 20% below average. Although the market closed higher yesterday, after the settlement, it sold off sharply after the release of the minutes of the Federal Reserve. As this report is being compiled on October 29, the December contract is trading sharply lower, down $28.40, or -2.41% and has made a daily low of 1146.80, which is the lowest print since $1138.00 made on October 9.

As the extract below indicates, the position of managed money on the long side of the gold market has increased dramatically during the past three COT reporting periods. These speculators will provide fuel for a continued downside move and at this juncture, we have not seen any evidence of liquidation, but expect an avalanche of selling once prices break major support. Continue to stand aside.

From the October 25 Weekend Wrap on gold:

“We took a look at gold’s performance based upon the very strong increase in the net long position held by managed money. From September 30 through October 20, which represents 3 COT periods, December gold advanced just $50.70 or +4.42%. During this time, the net long position by managed money went from 40,564 contracts in the September 29 report to a net long position of 119,344 in the October 20 report, or an increase of 78,780 contracts.”

Silver: December silver will generate a short-term sell signal if the daily high is below OIA’s key pivot point for October 29 of $15.604.

December silver advanced 43.0 cents on heavy volume of 77,386 contracts. Total open interest increased by 6,298 contracts, which relative to volume is approximately 230% above average meaning aggressive new buyers were entering the market in large numbers and driving prices to a new high for the move of $16.370, which is the highest print since $16.51 made on June 18. The silver market made its high prior to the release of the Federal Reserve minutes, and after, sold off sharply. This continues on October 29 and as this report is being compiled, the December contract is trading sharply lower, down 74.8 cents, or -4.59% and has made a daily low of 15.535, which is the lowest print since 15.375 made on October 8. Stand aside.

Dollar index:

The December dollar index advanced by a strong 86.9 points on heavy volume of 47,972 contracts. Total open interest increased just 244 contracts, which relative to volume is approximately 75% below average. Ever since the dollar index generated a short-term buy signal on October 23 and an intermediate term buy signal on October 26, total open interest action has been unimpressive: meaning it either declines on advances or rises by small amounts when it closes higher.

For example, on October 23 when the December contract generated a short-term buy signal, the December contract advanced 78.9 points on volume of 46,657 contracts and total open interest increased just 106. On October 22, when the December contract had one of the largest moves in many months, up 1.386 points on volume of 53,076, total open interest declined by a massive 4,481.. This pattern indicates a reluctance on the part of potential market participants to make commitments to the long side of the dollar index. However, we see higher prices ahead. The December dollar index remains on short and intermediate term buy signals.

Euro:

The December euro lost 1.41 cents on volume of 293,073 contracts. Total open interest increased by 4,682 contracts, which relative to volume is approximately 40% less than average, however a total open interest increase on yesterday’s sharp decline is bearish. As this report is being compiled on October 29, the December contract is trading 57 pips higher after making a daily low of 1.0908, which is slightly above yesterday’s print of 1.0904. On October 23, OIA announced that the December euro generated short and intermediate term sell signals. At this juncture we have no specific recommendation, but advise approaching the market from the bearish side.

Australian dollar: The December Australian dollar will generate a short-term sell signal on October 29, which reverses the short-term buy signal of October 7. The December contract remains on an intermediate term sell signal.

The December Australian dollar lost 1.10 cents on heavy volume of 118,369 contracts. Total open interest increased by 1,301 contracts, which relative to volume is approximately 45% below average, but a total open interest increase on yesterday’s sharp decline is bearish. As this report is being compiled on October 29, the December contract is trading 7 pips lower on the day and has made a new low for the move of 70.53, which is the lowest print since 70.42 made on October 6. We have no recommendation.

10 Year Treasury Note: The December 10 year note will generate a short term sell signal on October 29. It remains on an intermediate term buy signal.

The December 10 year treasury note lost 23 points on volume of 1,288,813 contracts. Total open interest declined just 5,895 contracts, which is minuscule and dramatically below average. As this report is being compiled on October 29, the December contract has made a new low for the move of 127-210, which is the lowest print since 127-140 made on September 25. Now that the 10 year note is on a short-term sell signal, the market should have a counter trend rally lasting 1-3 days and this is the opportunity to initiate bearish positions you are so inclined. Wait for the rally.