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On September 25, the Brazilian Real has rallied 7% against the US dollar and this is giving a boost to commodities grown in Brazil. Additionally, the Brazilian Central Bank has said they will support the Real to stem further declines against the US dollar. 

Corn:

December corn lost 1.75 cents on volume of 148,121 contracts. Total open interest increased by 3469 contracts, which relative to volume is approximately 10% below average, but yesterday’s open interest increase on a minor price decline is negative. The December and March 2016 contracts lost 865 of open interest.

As this report is being compiled on September 25, the December contract is trading 5.00 cents higher and has made a daily high of 3.87 3/4, which is the highest print since 3.91 made on September 16. However, December Chicago wheat is outperforming with a gain of 2.26% versus December corn of +1.44%.

For the rally to resume, the December contract must make a daily low above OIA’s pivot point of 3.82 1/4 and the low thus far on September 25 has been 3.81. On September 14, OIA announced that December corn generated a short term buy signal, but remains on an intermediate term sell signal. We have no recommendation.

Soybeans:

On September 25, November soybeans are trading 17.00 cents higher and have made a daily high of 8.90. On Monday, OIA will provide the stats and analysis on today’s trading, but the November contract will not generate a short-term buy signal on September 25. For this to occur, the low of the day must be above OIA’s key pivot point for September 25 of 8.83 3/8 and the low thus far on September 25 has been 8.69.

It will be important for total open interest to increase in today’s trading. It should be noted that yesterday when November soybeans rallied 4.25 cents on volume of 180,281 contracts, total open interest increased by a massive 10,207, which relative to volume is approximately 120% above average, which is a very large number, but relative to the size of the advance, the large open interest increase indicates that there was a fair amount of aggressive selling keeping a lid on the advance.

Chicago wheat:

On September 25, December Chicago wheat is trading 10.50 cents higher and has made a daily high of 5.10 1/2. On Monday, OIA will provide the stats on today’s trading, but the December contract will not generate a short-term buy signal on September 25. For this to occur, the low of the day must be above OIA’s key pivot point for September 25 of 5.00 5/8 and the low thus far on September 25 has been 4.96 1/4. It will be important for total open interest to increase in today’s trading.

Cocoa:

December cocoa lost $22.00 on heavy volume of 42,354 contracts. Volume was the heaviest going back to September 8 when December cocoa generated short and intermediate term buy signals. On September 24, total open interest increased 200 contracts, which is the smallest open interest increase since the generation of short and intermediate term by signals, but is the 14th consecutive total open interest increase. The December contract lost 2,193 of open interest, March 2016 -277 and July 2016 -374, yet there were sufficient open interest increases in the forward months to offset the decline in the three delivery months.

For the past four days, total open interest has increased by 5,360 contracts and the December contract has declined by $18.00. This is negative open interest action during the past four days relative to the cumulative decline. This indicates the market has run out of steam for now, and a correction is overdue.

From September 8, when December cocoa generated short and intermediate term buy signals through September 24, total open interest has increased every day, which brings the cumulative increase to 33,854 contracts while December cocoa has advanced $125.00.

As this report is being compiled on September 25, December cocoa is trading $8.00 lower. Global macro risk is increasing, and this heightens the likelihood of a sharp decline in cocoa as global markets continue their slide. Although, we think clients should stand aside in cocoa, if trading it, options should be used not futures.

Dollar index:

The December dollar index lost 5.7 points on volume of 49,794 contracts. Total open interest declined just 64 contracts. As this report is being compiled on September 25, the December contract is trading 27.6 points higher and has made a daily high of 96.880, which takes out the September 23 print of 96.715, the day the December dollar index generated a short-term buy signal. Since generating the buy signal on September 23, the dollar index experienced a one day pullback on September 24, and it appears likely the rally will continue. We have no recommendation.

Euro:

The December euro advanced 12 pips on volume of 244,991 contracts. Total open interest declined by 1,557, which relative to volume is approximately 65% below average. The pound rallied to a high of 1.1311 on September 24, which was the highest print since 1.1347 made on September 21, and then it proceeded to sell off sharply as US indices rallied.

On September 22, the December euro generated a short-term sell signal, and remains on an intermediate term buy signal. For an intermediate term sell signal to occur, the high of the day must be below OIA’s key pivot point for September 24 of 1.1100. We think the euro is headed lower, and our only trepidation about recommending the initiation of bearish positions at current levels is our negative view of US equities, which lately has provided a lift to the euro whenever equities decline.

British pound: OIA is discontinuing coverage of the British pound until we announce a signal change, see a trading opportunity or spot unusual activity. The December British pound remains on short and intermediate term sell signals.

WTI crude oil:

November WTI crude oil advanced 43 cents on volume of 641,403 contracts. Total open interest increased by 8,878 contracts, which relative to volume is approximately 40% below average, but a total open interest increase on yesterday’s advance is constructive. The November contract gained 5,613 of open interest. As this report is being compiled on September 25, the November contract is trading 43 cents higher after making a daily high of $46.38, which takes out yesterday’s print of 45.18, but is below the high of 47.15 made on September 23.

Despite yesterday’s positive open interest action on the advance, we see prices likely moving lower and a short-term sell signal will be generated if the daily high is below OIA’s key pivot point of $43.78. The rally will continue if the November contract makes a daily low above OIA’s pivot point for September 25 of 46.24. We have no recommendation, and think WTI may get a bounce if Congress votes to with the ban on crude oil exports.

Gold: December gold will generate a short term buy signal on September 25, but will remain on an intermediate term sell signal.

December gold advanced $22.30 on heavy volume of 250,343 contracts. Volume was the strongest since August 24 when 284,498 contracts were traded and gold lost $6.00 while total open interest increased by 855. On September 25, total open interest increased by 8,098 contracts, which relative to volume is approximately 15% above average.

Although yesterday’s volume was strong, the total open interest increase was a bit disappointing, especially considering the magnitude of the advance and the fact that December gold made a new high for the move of 1156.40, which is the highest print since $1156.30 made on August 25.

The short-term moving averages are in a bullish set up with the 20 day moving average of 1124.70 above the 50 day of 1116.30. Additionally, from a seasonal point of view, the next couple of months tend to favor advancing gold prices.

Silver:

December silver advanced 34.1 cents on volume of 50,018 contracts. Total open interest increased by a massive 3,370 contracts, which relative to volume is approximately 160% above average meaning aggressive new buyers were entering the silver market in large numbers and moving prices higher.

Although, yesterday’s high of $15.180 is considerably below the high for the move of 15.435 made on September 18, the open interest action was some of the best we have seen on a price advance for the past couple of months, and was considerably stronger than the open interest increase in gold. On September 21, December silver generated a short-term buy signal and remains on an intermediate term sell signal. We have no recommendation at this juncture.

S&P 500 E-mini:

The December S&P 500 E-mini lost 9.75 points on volume of 2,222,693 contracts. Total open interest declined by 8,092. For the past two days, the E-mini has declined by relatively minor amounts and total open interest has declined by minimal numbers as well. Conceivably, the market may be setting itself up for a rally, and as this report is being compiled on September 25, the December contract is trading 18.75 points higher and has made a daily high of 1951.00, which is the highest print since 1965.00 made on September 22.

Today, it was announced the Speaker of the House of the US Congress has resigned, and this raises the possibility of a government shutdown. This latest wrinkle only adds further uncertainty and makes markets more vulnerable to downside action now that one of the voices of moderation has fallen by the wayside. Continue to maintain the at the money long option straddle and switch into November or December contracts if concerned about the effect of time decay on your option position.