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Corn:

December corn lost 4.50 cents on light volume of 220,288 contracts. Volume shrank from October 7 when the December contract lost 2.50 on volume of 234,012 contracts and total open interest declined by 3,493 contracts. On October 8, total open interest declined by a substantial 9,787 contracts, which relative to volume is approximately 75% above average meaning liquidation was heavy on the decline. This is not negative open interest action relative to the price decline and it is positive that open interest did not increase on the declines of October 7-8. 

As this report is being compiled after the release of the USDA report, December corn is trading 5.25 lower and has made a daily low of 3.83 1/2, which is the lowest print since 3.83 1/2 made on September 30.For December corn to continue its advance, it must make a daily low above OIA’s key pivot point for October 9 of 3.96 3/8, which would generate an intermediate term buy signal. Corn will resume its downtrend if the December contract makes a daily high below OIA’s key pivot point for October 9 of 3.80 1/8. We have no recommendation.

Soybeans:

November soybeans lost 9.75 cents on volume of 278,099 contracts. Volume was the strongest since October 1 when the November contract lost 14.75 cents on volume of 288,366 contracts and total open interest declined by 10,848. On October 8, total open interest declined by 2,716 contracts, which relative to volume is approximately 50% below average. The November contract lost 18,586 of open interest. It is positive that open interest did not increase in yesterday’s decline.

As this report is being compiled after the release of the USDA report, November soybeans are trading 7.25 cents higher and has made a high of 8.93, which takes out yesterday’s print of 8.91 3/4, but is below the October 7 high of 8.96. Additionally, the November contract has made a low on October 9 of 8.71 1/2, which is the lowest print since 8.72 made on October 5.

In yesterday’s report, we discussed some of the positive aspects of the soybean market and that the daily low of 8.85 3/4 made on October 7 was at the key pivot point, but was not a confirmed buy signal because the daily low was not above the actual pivot point of 8.85 3/4.

For soybeans to continue the rally, the November contract must make a daily low above OIA’s key pivot point for October 9 of 8.86, which would generate a short-term buy signal. The November contract will resume its downtrend (which we think is unlikely) if the daily high is below OIA’s pivot point for October 9 of 8.70 1/2.We have no recommendation.

From the October 7 report on soybeans:

“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.”

Soybean oil:

December soybean oil lost 26 points on volume of 101,129 contracts. Total open interest increased by 4,146 contracts, which relative to volume is approximately 55% above average meaning that aggressive new short-sellers were entering the market in substantial numbers and driving prices lower. As this report is being compiled after the release of the USDA report, the December contract is trading 16 points higher and has made a daily high of 28.65, which takes out yesterday’s print of 28.62. December soybean oil remains on a short-term buy signal, but an intermediate term sell signal. We have no recommendation.

Sugar:

March sugar advanced 3 points on volume of 118,498 contracts. Volume was the lightest since October 5 when the March contract gained 11 points on volume of 104,881 contracts and total open interest declined by 2,056. On October 8, total open interest increased by 1,240 contracts, which relative to volume is approximately 45% below average.

Yesterday, the March contract made a new high for the move of 14.05 and as this report is being compiled on October 9, the March contract is trading sharply higher, up 38 points, or +2.71% and has made a new high for the move of 14.43, which is the highest print since 14.50 made on May 19. Since the rally began on September 24, sugar has only closed lower on only two days, September 29 and October 6.

These are been shallow declines and since generating a short-term buy signal on September 28 and an intermediate term buy signal on October 1, sugar has not had a sufficient pullback to merit the initiation of long positions. The rally in sugar is coinciding with a massive rally in emerging market currencies and the Aussie and Canadian dollar. In other words, the massive short position held in commodities and currencies of countries that export commodities are getting blown out in a massive short squeeze. Stand aside.

Coffee: December coffee will generate an intermediate term buy signal on October 9 provided the daily low remains above OIA’s key pivot point for October 9 of 1.2880.

December coffee advanced 2.40 cents on volume of 24,700 contracts. Volume shrank substantially from October 7 when the December contract lost 2.05 on volume of 35,994 contracts and total open interest declined by 1,493. On October 8, total open interest declined by 2,054 contracts, which relative to volume is approximately 55% below average, and the open interest action on October 8 was negative and continues to indicate that short-sellers are powering the market higher. We are seeing this in a number of commodities and currencies where large short positions have been held.

As this report is being compiled on October 9, the December contract is trading sharply higher, up 5.10, or +3.93% and has made a new high for the move of 1.3425, which is the highest print since 1.3550 made on August 20. On October 5, December coffee generated a short-term buy signal and it appears likely that an intermediate term buy signal will be generated on October 9.

We have advised a stand aside posture because we been concerned about the poor open interest action and that coffee has not had much of a pullback. It appears to be rising in sympathy with the rest of the commodity complex and emerging market currencies. We continue to advise a stand aside posture.

WTI crude oil:

November WTI crude oil advanced $1.62 on heavy volume of 1,100,926 contracts. Volume was the strongest since October 7 when 1,120,666 contracts were traded and the November contract lost 72 cents while total open interest declined by 24,875 contracts.

On October 8, total open interest increased by 9,303 contracts, which relative to volume is approximately 55% below average, but the November contract lost 52,916 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in November and increase total open interest.

In summary, the performance yesterday was outstanding as the November contract made a new high for the move of $50.07, and as this report is being compiled on October 9, the November contract has made another new high of 50.92, which is the highest print since 50.75 made on July 23.

On September 3, OIA announced that November WTI generated a short-term buy signal, and for an intermediate term buy signal to occur, the low of the day must be above OIA’s key pivot point for October 9 of $50.77. We have no recommendation.

Gold: On October 8, December gold generated an intermediate term buy signal, after generating a short-term buy signal on October 7.

December gold lost $4.40 on volume of 127,276 contracts. Total open interest declined by 2,146 contracts, which relative to volume is approximately 25% below average. As this report is being compiled on October 9, the December contract is trading $12.10 higher and has made a daily high of 1159.30, which takes out the September 24 high of 1156.40. Gold like the rest of the commodity complex is rallying strongly, and at this juncture it remains too early to determine whether this move represents a true turnaround in the yellow metal. At this juncture, we are unable to recommend bullish positions.

Dollar index: The December dollar index will generate a short-term sell signal on October 9 provided the daily high remains below OIA’s key pivot point for October 9 of 95.480.

The December dollar index lost 17.3 points on volume of 29,079 contracts. Total open interest increased by 72 contracts. This continues the pattern a bearish price and open interest during the past couple of weeks. As this report is being compiled on October 9, the December contract has made a new low for the move of 94.745, which is the lowest print since 94.195 made on September 18. We have no recommendation.

Euro:

The December euro gained 21 pips on volume of 222,256 contracts. Total open interest increased by 3,533 contracts, which relative to volume is approximately 40% below average, but yesterday’s open interest increase on the price advance continues the pattern of bullish open interest on price advances and declines that we’ve seen for the past two weeks.

Though the December contract remains on a short-term sell signal, which was generated on September 22, it appears likely the euro will generate a short-term buy signal, perhaps as early as Monday. For this to occur, the low of the day must be above OIA’s key pivot point for October 9 of 1.1308. The December euro remains on an intermediate term buy signal.

Canadian dollar:

The December Canadian dollar advanced 32 pips on volume of 52,951 contracts. Total open interest declined by 118 contracts, which relative to volume is approximately 85% below average, but yesterday’s total open interest decline continues a pattern of open interest declines on price advances going back to October 1.

For the past six days beginning on October 1, the December Canadian dollar has rallied a total 1.90 cents and total open interest has declined each day except for October 7 (+530) bringing the cumulative total open interest decline for the six day period to 14,463 contracts. This confirms that short-sellers have been powering the Canadian dollar higher, not new buying.

As this report is being compiled on October 9, the December Canadian dollar is trading higher, up by 37 pips and has made a new high for the move of 77.58, which is the highest print since 77.68 made on July 29. On October 5, OIA announced that the December Canadian dollar generated a short-term buy signal, and for an intermediate term buy signal to occur, the low of the day must be above OIA’s key pivot point for October 9 of 77.26.

The COT report will be released this afternoon and it will be interesting to see whether the rally has blown out a sufficient number of short-sellers. We are eyeing the Canadian dollar for possible bearish positions, but prefer to see more data before making a decision.