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Corn:

December corn lost 8.50 cents on heavy volume of 397,649 contracts. Volume was strong due to the release of the USDA report, and the market interpreted the data as negative. On October 9, total open interest declined by a massive 15,770 contracts, which relative to volume is approximately 50% above average meaning liquidation was substantial on Friday’s decline.

As this report is being compiled on October 12, the December contract is trading 2.25 lower and has made a daily low at 3.80 1/4, which takes out Friday’s print of 3.81 1/2. It looks increasingly likely that corn is going to reverse the short-term buy signal of September 14 and for this to occur, the high of the day must be below OIA’s key pivot point for October 12 of 3.79 3/4. For the rally to resume, the low of the day must be above OIA’s pivot point for October 12 of 3.87 3/8.We have no recommendation.

Soybeans:

November soybeans advanced 4.50 cents on heavy volume of 390,675 contracts. Total open interest increased by a massive 15,454 contracts, which relative to volume is approximately 50% above average meaning that huge numbers of new longs were entering the market and driving prices higher (8.97). The November contract lost 9,688 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 substantially. There were open interest increases in the January 2016 through August 2017 contracts.

November soybeans made their high for the move of 9.02 1/4 on September 30 and thus far the market has not had the momentum to take out the high, let alone generate a short-term buy signal. As this report is being compiled on October 12, the November contract is trading 5.25 cents higher and has made a daily high of 8.94 1/2, which is below Friday’s print of 8.97. Despite the relatively firm performance recently, soybeans have been unable to generate a short-term buy signal. For this to occur, the low of the day must be above OIA’s key pivot point for October 12 of 8.86 1/2. We have no recommendation.

Soybean oil:

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

December soybean oil lost 2 points on volume of 165,783 contracts. Total open interest increased by 4,736 contracts, which relative to volume is average. The October and December 2015 contracts lost 1,424 of open interest. As this report is being compiled on October 12, the December contract is trading 10 points higher and has made a daily high of 28.89, which is above Friday’s print of 28.65 and is the highest price since 28.97 made on October 7. On October 5, December soybean oil generated a short-term buy signal, but remains on an intermediate term sell signal. We have no recommendation.

Sugar:

March sugar advanced 33 points on volume of 143,047 contracts. Total open interest increased by 3,796 contracts, which relative to volume is average. The October 2016 contract lost 1,155 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in October and increase total open interest to an average number.

As we pointed out in the weekend report, the massive liquidation of speculative short-sellers has been the impetus powering the market higher with little in the way of new buying by managed money. On September 28, March sugar generated a short-term buy signal and an intermediate term buy signal on October 1. As this report is being compiled on October 12, the March contract is trading 10 points lower after making a daily high of 14.33, which is below Friday’s print of 14.43, the high for the move. We continue to recommend a stand aside posture.

Coffee: On October 9, December coffee generated and intermediate term buy signal after generating a short-term buy signal on October 5.

December coffee advanced 3.15 cents on volume of 36,242 contracts. Total open interest declined by a massive 1,518 contracts, which relative to volume is approximately 55% above average. The December contract lost 2,423 of open interest. The action on Friday continues the bearish open interest action relative to price advances that we’ve seen since coffee first generated a short-term buy signal.

This is one reason, we are unable to recommend bullish positions and the market is massively overbought. As this report is being compiled on October 12, the December contract is trading 3.60 cents higher and has made a new high for the move of 1.3760, which is the highest print since 1.3550 made on August 20. Stand aside.

WTI crude oil:

November WTI crude oil advanced 20 cents on very heavy volume of 1,155,917 contracts. Volume increased from October 8 when the November contract gained $1.62 on volume of 1,100,926 contracts and total open interest increased by 9,303. On October 9, total open interest declined by 2,960 contracts, which is minuscule, but the open interest decline is a negative development especially because the November contract made a new high for the move of $50.92 on heavy volume. The November contract lost 58,825 of open interest, which means there were insufficient increases in the forward months to offset the decline of open interest in November.

When combining the action of October 8-9, the bottom line: November advanced $1.82 during these two days, but total open interest increased just 6,343. This is a dismal number, and indicates that market participants lack confidence in the move. As this report is being compiled on October 12, the November contract is trading $2.25 lower and trading on the lows of the day. Although, WTI generated a short-term buy signal on September 3, it has been unable to generate an intermediate term buy signal. For this to occur, the low of the day must be above OIA’s key pivot point for October 12 of 50.78. We have no recommendation.

Gold:

We will report on gold when we announce a signal change, see a trading opportunity or spot unusual activity.

December gold advanced $11.60 on surprisingly light volume of 138,927 contracts. Total open interest increased by 4,641 contracts, which relative to volume is approximately 15% above average meaning that new buyers were entering the market and driving prices to a new high for the move of 1159.30. As this report is being compiled on October 12, the December contract is trading $7.50 above Friday’s close and has made a new high for the move of 1168.60, which is the highest print since 1169.80 made on August 24.

The low-volume on Friday’s advance continues on October 12, and this indicates a lack of participation, though open interest action has been favorable. At this juncture, it is difficult to ascertain whether gold is in the process of turning around or whether this is another bear market rally. One hopeful sign: platinum will generate a short-term buy signal on October 12.

Copper: December copper will generate a short-term buy signal on October 12 provided the daily low remains above OIA’s key pivot point for October 12 of $2.3763.

December copper advanced 7.10 cents on heavy volume of 89,453 contracts. Total open interest increased by 4,722 contracts, which relative to volume is approximately 105% above average meaning aggressive new buyers were entering the copper market in large numbers and driving prices to a new high for the move of 2.4375, which is the highest print since $2.4140 made on September 21.

It appears that a double bottom has been made in copper with the major low occurring on August 24 at 2.2025 and the secondary low on September 28 of 2.2320. The fact that total open interest increased on October 9 indicates that short-sellers were not driving prices higher, and according to the most recent COT report, managed money remains net short as of October 6. We do not like the fundamentals of copper and see no compelling reason to be involved in the market. Stand aside.

Dollar index: On October 9, the December dollar index generated a short-term sell signal and remains on an intermediate term sell signal.

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

The December dollar index lost 52.4 points on volume of 31,937 contracts. Total open interest increased by a massive 2,561 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 (94.745). We have been warning clients for the past couple of weeks that the price and open interest action in the dollar index was acting bearishly and advised a stand aside posture.

As this report is being compiled on October 12, the dollar index is trading 9.8 points lower and has made a new low for the move of 94.665. Now that the dollar index is on a short term sell signal, the market should have a counter trend rally lasting 1-3 days before resuming the downtrend. Stand aside.

Euro: The December euro will generate a short-term buy signal on October 12, which reverses the short-term sell signal of September 22. The December euro remains on an intermediate term buy signal.

The December euro advanced 93 pips on volume of 210,417 contracts. Total open interest increased by a sizable 6,191 contracts, which relative to volume is approximately 5% above average, and this continues the very favorable open interest action on price advances and declines that we have been seen for the past couple of weeks.

As this report is being compiled on October 12, the December contract is trading nearly unchanged after making a new high for the move of 1.1408, which is above Friday’s print of 1.1398. We expect the euro to continue its advance and have no recommendation.

Swiss franc: the December Swiss franc will generate a short-term buy signal on October 12, but remains on an intermediate term sell signal.

Australian dollar:

The December Australian dollar advanced 74 pips on volume of 87,711 contracts. Total open interest increased by 2,329 contracts, which relative to volume is average. The open interest increase on October 9 follows the modest open interest increase on October 8 when the December contract gained 52 pips on volume of 90,521 contracts and total open interest increased by 280.

The compelling reason for a further advance in the Australian dollar is that short-sellers were not powering the market higher on October 8-9 and this increases the likelihood of the advance continuing because they will be forced to cover as prices move higher.

On October 7, the December Australian dollar generated a short-term buy signal and for an intermediate term buy signal to be generated, the low of the day must be above OIA’s key pivot point for October 12 of 72.99. As this report is being compiled on October 12, the December contract is trading 22 pips higher and has made a daily high of 73.58, which is above Friday’s print of 73.20. We have no recommendation.

Canadian dollar:

The December Canadian dollar advanced 36 pips on volume of 58,995 contracts. Total open interest declined by a sizable 1,795 contracts, which relative to volume is approximately 10% above average meaning liquidation was above normal as prices advanced to a new high for the move of 77.58. The open interest action since the beginning of the rally has been consistently bearish and the Canadian dollar has been powered higher by distressed short-sellers.

The COT report released Friday revealed that managed money remains heavily net short, and this group should provide support until they get blown out. Interestingly, for the past two days, the open interest action in the Australian dollar has been positive while bearish in the Canadian dollar.

For the past seven days beginning on October 1, the December Canadian dollar has rallied a total 2.26 cents and total open interest has declined each day except for October 7 (+530) bringing the cumulative total open interest decline for the seven day period to 16,258 contracts.