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Corn:

December corn lost 1.25 on volume heavy of 420,609 contracts. Volume was the strongest since September 11 when 446,760 contracts were traded and the December contract closed at 3.87. On September 30, total open interest increased by a sizable 11,121 contracts, which relative to volume is average. The December contract lost 1,198 of open interest  and there were open interest increases in the March 2015 through December 2017 contracts. Yesterday’s action is best characterized as a battle between buyers and sellers and sellers had the edge by moving prices fractionally lower by the close.

As this report is being compiled on October 1, the December contract is trading 4.50 cents higher and has made a daily high of 3.93, which is below yesterday’s print of 3.94 1/2. It is apparent that corn does not have the momentum to move considerably higher at this juncture. Another major concern is that the rally in Chicago wheat has done little to help corn move higher.

Although December corn generated a short-term buy signal on September 14, it has been unable to take out the September 15 high of 3.95, the high for the move thus far. The closest the December contract came to breaking above it occurred yesterday when it made a high of 3.94 1/2. For an intermediate term buy signal to occur (which appears unlikely), the low of the day must be above OIA’s key pivot point for October 1 of 3.96 3/8. We have no recommendation

Chicago wheat: December Chicago wheat will generate a short-term buy signal on October 1 if the daily low remains above OIA’s key pivot point for October 1 of 5.02 1/4.

December Chicago wheat advanced 9.00 on volume of 143,065 contracts.Volume was the strongest since September 2 when 144,539 contracts were traded and the December contract closed at 4.79. On September 30, total open interest increased by 1,296 contracts, which relative to volume is approximately 55% below average. The May 2016 contract lost 177 of open interest.

While the open interest action for Chicago wheat has been fairly positive, it is not robustly so. According to the latest COT report, managed money remains short Chicago wheat, and if the market continues to move higher, these short-sellers will add fuel to the upside move. Yesterday’s move indicates that at this juncture they are not panicking.

As this report is being compiled on October 1, the December contract is trading 9.50 higher and has made a daily high of 5.23 3/4, which is the highest print since 5.28 made on August 11. An intermediate term buy signal will be generated if December Chicago wheat makes a daily low above OIA’s key pivot point for October 1 of 5.25 3/8. We have no recommendation.

Soybeans:

November soybeans advanced 7.75 cents on heavy volume of 297,057 contracts. Volume exceeded the recent high print of 252,253 contracts traded on September 11 when the November contract closed at 8.74 1/4. On September 30, total open interest increased by 5,309 contracts, which relative to volume is approximately 25% less than average, however the November contract lost 2,849 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. The open interest action on September 30 has been the most positive we have seen in recent days, but this is not saying much.

As this report is being compiled on October 1, the November contract is trading 7.25 lower after making a daily high of 8.99 1/4, which is below yesterday’s print of 9.0 2 1/4. We have been telling clients that for soybeans to continue their advance, the November contract had to generate a short-term buy signal, and thus far has been unable to do so. For the November contract to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point for October 1 of 8.85 1/4, and the low on October 1 has been 8.81. We have no recommendation.

Cocoa: On October 1, December cocoa will generate short and intermediate term sell signals.

December cocoa lost $68.00 on volume of 40,445 contracts. Total open interest declined by 1,483 contracts, which relative to volume is approximately 20% above average meaning liquidation was substantial on yesterday’s strong decline. This follows an open interest decline of 1,285 on September 29 when the December contract lost $60.00. Now that December cocoa is on a short and intermediate term sell signal, the market is likely to have a counter trend rally lasting 1-3 days, but we discourage the initiation a bearish positions because cocoa fundamentals are fairly strong. Stand aside.

Sugar: March 2016 sugar will generate an intermediate term buy signal if the daily low remains above OIA’s key pivot point for October 1 of 12.83.

March 2016 sugar advanced 42 points on volume of 174,382 contracts. Total open interest increased by 2,307 contracts, which relative to volume is approximately 40% below average, but the open interest increase in yesterday’s trading indicates that short-sellers were not powering the market higher, rather it was new buying.

While this is positive, we know there are large numbers of manage money shorts in the market, which means if sugar continues to rise, short-sellers will be forced to cover, thereby sending prices even higher. As this report is being compiled on October 1, the March contract is trading 38 points higher and has made a new high for the move of 13.26, which is the highest print since 13.28 made on July 20.

On September 28, OIA announced that March sugar generated a short-term buy signal, and since then the market has not had its usual 1 to 3 day pullback. As stated above, it appears likely that March sugar will generate an intermediate term buy signal as long as the daily low remains above OIA’s key pivot point for October 1 of 12.83. DO NOT chase this market on the long side: it is overdue for a pullback.

WTI crude oil:

November WTI crude oil lost 14 cents on volume of 629,040 contracts. Total open interest increased by 1,114, a small number and substantially below average relative to volume. The November contract lost 8,012 of open interest. As this report is being compiled on October 1, the November contract is trading nearly unchanged after having had a strong rally up to 47.10, which is the highest print since 47.15 made on September 23.

We have cautioned clients remain on the sidelines because the market has not generated a short-term sell signal, which would reverse the short-term buy signal, nor has it been able to make a daily low above OIA’s pivot point, which on October 1 is $46.21, which would suggest higher prices. For a short-term sell signal to be generated, the high of the day must be below OIA’s key pivot point for October 1 of $43.90. Stand aside.

Copper:

December copper advanced 8.95 cents on heavy volume of 79,804 contracts. Total open interest increased just 820 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on October 1, the December contract is trading 3.85 cents lower after making a daily high of 2.3765, which is below OIA’s key pivot point for the generation of a short-term buy signal. For December copper to generate a short-term buy signal (which we view as highly unlikely), the daily low must be above the key pivot point of 2.3812. We view yesterday’s rally as a rally in a bear market and expect lower prices.

Gold: December gold will generate a short-term sell signal on October 1 if the daily high remains below OIA’s key pivot point for October 1 of $1119.20. This will reverse the September 25 short term buy signal. December gold remains on an intermediate term sell signal.

December gold lost $11.60 on volume of 161,955 contracts. Total open interest increased by 1,379 contracts, which relative to volume is approximately 55% below average, but yesterday’s open interest increase on the price decline is bearish. As this report is being compiled on October 1 the December contract is trading $3.50 lower and has made a daily high of 1118.50, which is below OIA’s key pivot point for October 1 of 1119.20. If the daily high in December gold holds on October 1, a  short-term sell signal will be generated. Once this occurs, a counter trend rally of 1 to 3 days is likely. 

Dollar index:

The December dollar index advanced 48.7 points on light volume of 24,283 contracts. Total open interest increased by 630 contracts, which relative to volume is average. The strong advance in yesterday’s trading was not accompanied by a substantial increase in volume and open interest. This reflects the tentative view of market participants, and thus far, the December contract has not been able to make a daily low above OIA’s pivot point of 96.300. For the December dollar index to continue its advance, it must make a daily low above the pivot point.

Euro:

The December euro lost 93 pips on volume of 203,088 contracts. Total open interest increased by 947 contracts, which relative to volume is approximately 75% below average, but an open interest increase on yesterday’s price decline is bearish. Frankly, we are a bit surprised that the open interest increase was substantially below average. 

On September 28 when the December contract advanced 41 pips, total open interest increased by 1,360. In other words, total open interest increased by a greater amount on the euro’s advance than on the decline. This keeps us from recommending bearish positions despite the euro being on a short-term sell signal. However, it remains on an intermediate term buy signal.

As this report is being compiled on October 1, the December contract is trading 30 pips higher and has made a daily high of 1.1223, which is below yesterday’s print of 1.1275. The decline should accelerate if the December contract makes a daily high below OIA’s pivot point of 1.1213. The short-term sell signal will be reversed if the December contract makes a daily low above OIA’s key pivot point for October 1 of 1.1345. We have no recommendation.

S&P 500 E-mini:

The S&P 500 E-mini had a strong rally on September 30 and advanced 34.25 points on volume of 2,223,911 contracts. Total open interest declined by 25,932 contracts, which relative to volume is approximately 50% below average, however a total open interest decline on yesterday’s strong advance is negative.

As this report is being compiled on October 1, the December contract is trading 11.50 points lower after making a daily high of 1929.50, which is the highest print since 1929.75 made on September 28. Continue to hold the long at the money option straddle in the November and December contracts that we recommended two weeks ago.