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Corn:

December corn lost 2.25 cents on volume of 234,012 contracts. Volume fell sharply from October 6 when the December contract gained 4.75 cents on volume of 313,460 contracts and total open interest increased by 7,338. On October 7, total open interest declined by 3,493 contracts, which relative to volume is approximately 40% below average. The December contract lost 6,060 of open interest, March 2016 -570.

As this report is being compiled on October 8, the December contract is trading 3.25 lower and has made a daily low at 3.90 1/2, which is the lowest print since 3.88 3/4 made on October 5. December corn remains on a short-term buy signal and an intermediate term sell signal. We have no recommendation.

Soybeans:

November soybeans advanced 3.00 on volume of 207,642 contracts. Volume fell from October 6 when the November contract gained 3.75 cents on volume of 220,568 contracts and total open interest increased by 5,601. On October 7, total open interest declined by 5,187 contracts, which relative to volume is average. The November contract, which is approaching first notice day lost 14,589 of open interest, March 2016 -701.

Yesterday, November soybeans made a daily low of 8.85 3/4, which was the key pivot point for October 7 for the generation of a short-term buy signal. Although technically a buy signal was not generated yesterday, the fact remains yesterday’s action may signify the soybean market is turning and that a confirmed buy signal will be generated next week.

Yesterday’s low was the highest low since August 21. OIA has found that higher lows often precede major up moves and the November contract has been making a series of higher lows since October 2. As this report is being compiled on October 8, the November contract is trading 7.25 cents lower and has made a daily low of 8.80, which is below OIA’s key pivot point for October 8 of 8.86, which would generate the buy signal. Although, we do not think it is likely, the downtrend would resume if the November contract made a daily high below OIA’s pivot point for October 8 of  8.70 3/8. We have no recommendation.

Soybean oil:

December soybean oil lost 9 points on volume of 124,836 contracts. Total open interest declined by 1,253 contracts, which relative to volume is approximately 50% below average. The December contract lost 6,042 of open interest. As this report is being compiled on October 8, the December contract is trading 22 points lower. December soybean oil remains on a short-term buy signal, but an intermediate term sell signal. We have no recommendation.

Sugar:

March sugar advanced 35 points on volume of 183,317 contracts.Volume was the strongest since September 29 when the March contract gained 42 points on volume of 196,132 contracts and total open interest declined by 4,055. On October 7, total open interest increased by a massive 10,247 contracts, which relative to volume is approximately 120% above average meaning that large numbers of aggressive new buyers were bidding prices higher and the March contract made a new high for the move of 14.02, which is the highest print since 14.00 made on June 9, 2015.

The strong advance accompanied by heavy volume and a massive increase of open interest indicates that Johnny-come-lately’s are entering the market at 4 month highs. This increases the likelihood of a sharp setback, and since generating a short-term buy signal on September 28 and an intermediate term buy signal on October 1, the market has not had a correction of any duration.

Do not chase this market higher because it is now more vulnerable due to the large numbers of new long rushing into the market at the high-end of the trading range. As this report is being compiled on October 8, the March contract is trading 4 points higher and has made a new high for the move of 14.05. Stand aside.

Coffee:

December coffee lost 2.05 cents on heavy volume of 35,994 contracts. Volume was the strongest since September 10 when 35,629 contracts were traded and the December contract closed at 1.1640. On October 7, total open interest declined by 1,493 contracts, which relative to volume is approximately 50% above average meaning liquidation was substantial on the decline. This is normal open interest action on a price decline and is actually the most positive day from a price and open interest standpoint since coffee generated a short-term buy signal on October 5.

As this report is being compiled on October 8, the December contract is trading 2.30 cents higher and has made a daily high of 1.2880, which is below yesterday’s print of 1.3025, the high for the move. At this juncture, we continue to recommend a stand aside posture and would like to see more downside action with additional open interest declines before recommending bullish positions. Coffee has had a tendency to reverse signals rather quickly in the recent past, and clients should approach this market cautiously.

From the October 6 report on coffee:

“For the past three days beginning on October 2, total open interest has declined each day for cumulative total of 4,087 contracts while December coffee has advanced 7.35 cents. This is very negative, and reflects the fact that managed money has been heavily net short coffee and are covering positions, which is powering the market higher.”

WTI crude oil:

November WTI crude oil lost 72 cents on huge volume of 1,120,666 contracts. Volume was the strongest since September 2 when 1,212,457 contracts were traded and the November contract closed at $46.86. On October 7, total open interest declined by 24,875 contracts, which relative to volume is approximately 10% below average and an open interest decline accompanying a price decrease is positive open interest action. The November contract lost 62,899 of open interest.

As this report is being compiled on October 8, the November contract is trading sharply higher, up $1.48, or +3.10% and has made a daily high of 49.68, which is just shy of yesterday’s print of 49.71.On September 3, OIA announced that November WTI crude oil generated a short-term buy signal, and for most of September the November contract traded in a sideways pattern. Yesterday, November WTI made a daily low above OIA’s pivot point, which means the rally will continue. For November WTI to generate an intermediate term buy signal, the low of the day must be above OIA’s key pivot point for October 8 of $50.76.

Brent crude oil has generated a short-term buy signal for the first time in a couple of months, which reinforces the strong price pressure in the market. As we pointed out in numerous previous reports, new buying is moving prices higher, not short-sellers covering positions.

Brent crude oil: On October 7, November and December Brent crude oil generated short-term buy signals, but remains on an intermediate term sell signals.

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

November Brent crude oil lost 59 cents on heavy volume of 1,024,897 contracts. Total open interest declined by 7,118 contracts, which relative to volume is approximately 60% below average, and an open interest decline on yesterday’s price decrease is normal. The November contract lost 33,123 of open interest. As this report is being compiled on October 8, the November contract is trading sharply higher, up $1.80, or +3.51% and has made a new high for the move of 53.30, which takes out yesterday’s print of 53.15. We have no recommendation.

Gold: On October 7, December gold generated a short-term buy signal, but remains on an intermediate term sell signal.

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

December gold advanced $2.30 on light volume of 121,204 contracts. Total open interest increased by 1,070 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on October 8, the gold market is pulling back, which is typical after the generation of a short-term buy signal and has made a daily low of 1135.90, which is below yesterday’s print of 1141.30 and is the lowest since 1134.50 made on October 6. We have no recommendation.

Dollar index:

The December dollar index gained 1.7 points on light volume of 22,218 contracts. However, total open interest declined by a hefty 782 contracts, which relative to volume is approximately 20% above average meaning liquidation was substantial on the fractional advance. We have been concerned about the open interest action in the dollar index relative to price advances and declines and has been acting in a bearish fashion.

As this report is being compiled on October 8, the December contract is trading 28.5 points lower and has made a daily low of 95.175, which is the lowest print since 95.180 made on September 21, but the contract closed higher at 96.034 on the 21st. For the December contract to generate a short term sell signal, the high of the day must be below OIA’s key pivot point for October 8 of 95.505. We think there is an excellent chance a sell signal will occur shortly and there is strength in the components that comprise the dollar index: euro, British pound, yen, Swiss franc, Canadian dollar.

Euro:

The December euro lost 21 pips on volume of 185,169 contracts. Total open interest declined by 1,555 contracts, which relative to volume is approximately 55% below average. As this report is being compiled on October 8, the December contract is trading 38 pips higher and has made a daily high of 1.1326, which takes out yesterday’s print of 1.1296 and is the highest price since 1.1331 made on October 2.

As clients know, we have been skeptical about the euro’s ability to generate a short-term buy signal, which would reverse the short-term sell signal generated on September 22. However, at this juncture, the likelihood of a short-term sell signal is increasing and since generating the short-term sell signal, the euro has been acting in a remarkably firm manner.

Additionally, the open interest action has been very positive and is not indicative of the market that wants to go lower.   For the December contract to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point for October 8 of 1.1340. The downtrend will resume if the daily high is below OIA’s pivot point of 1.1211.We have no recommendation.

Australian dollar: On October 7, the December Australian dollar generated a short-term buy signal, but remains on an intermediate term sell signal.

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

The December Australian dollar advanced 51 pips on volume of 84,776 contracts. Total open interest declined by 1,101 contracts, which relative to volume is approximately 45% below average, but an open interest decline on yesterday’s price advance is negative and confirms that short-sellers are liquidating positions and powering the market higher.

According to the most recent COT report, managed money is short the Australian dollar by a ratio of 3.09:1. As this report is being compiled on October 8, the December Australian dollar is trading 58 pips higher and has made a new high for the move at 72.90, which takes out yesterday’s print of 72.09. We have no recommendation.

Canadian dollar:

December Canadian dollar lost 9 pips on volume of 65,736 contracts. Total open interest increased by 530 contracts, which relative to volume is approximately 55% below average. The total open interest increase in yesterday’s trading signifies that Johnny-come-lately’s are entering the market at the high end of the trading range.

As this report is being compiled on October 8, the December contract is trading 41 pips higher and has made a daily high of 76.98, which is below yesterday’s print of 77.06, and is the highest print since 77.10 made on August 13. We will continue to monitor the Canadian dollar to evaluate whether bearish positions make sense. On October 5, OIA announced that the December Canadian dollar generated a short-term buy signal and for the December contract to generate a in intermediate term buy signal, the low of the day must be above OIA’s key pivot point for October 8 of 77.27. We have no recommendation.

From the October 6 report on the Canadian dollar:

“For the past four days beginning on October 1, the December Canadian dollar has rallied a total 1.67 cents and total open interest has declined each day bringing the cumulative total open interest decline for the four day period to 14,925 contracts. This confirms that short-sellers have been powering the Canadian dollar higher, not new buying.”

“Once sufficient numbers of short-sellers have been blown out, the only way the Canadian dollar can continue to rally is if new buyers are willing to pay substantially higher prices. If the crude oil market continues to rally, this could provide a bit of support because Canada is a major exporter of oil, but ultimately we think prices are headed lower.”