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Soybeans:

January soybeans lost 19.50 cents on light volume of 223,580 contracts. Volume was the lowest since October 3 when soybeans lost 12.25 cents on volume of 183,432 contracts and total open interest increased by 603 contracts. On November 3, total open interest declined by 7,026, which relative to volume is approximately 25% above average. Collectively, the November 2014 through March 2015 contracts lost a total of 8,172 of open interest.As this report is being compiled on November 4, January soybeans are trading 13.50 lower and have taken out the October 28 low of 10.06 1/2.

We think it is possible to get a strong rally in the November contract, which would likely boost January contract prices and this would be the opportunity to initiate light bearish positions in soybeans. The market has been unable to make a low above the intermediate term pivot point, which just underscores the weakness of beans. Additionally, as we pointed out in previous reports, open interest on the advance was terrible, and in order for soybeans to move higher there must be new buyers willing to pay ever higher prices. We do not think this is in the cards. January soybeans remain on a short term buy signal, but an intermediate term sell signal. Use rallies to initiate light bearish positions, and exit these when and if January soybeans generate an intermediate term buy signal. For this to occur, the low the day must be above OIA’s key pivot point for November 4 of 10.43 7/8.

Soybean meal:

December soybean meal lost $16.30 on volume of 91,390 contracts. Surprisingly, volume was the lightest since October 20 when December soybean meal lost 1.10 on volume of 56,527 contracts and total open interest declined by 1,258 contracts. On November 3, total open interest increased by 324 contracts, which is minuscule and dramatically below average, however an open interest increase on the decline is bearish. Additionally, the December contract accounted for loss of 5,024 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in the December contract.The very light volume on yesterday’s decline combined with the increase of open interest indicates that many longs have not liquidated, which will further pressure the market. We think the big rally is over and though there will be occasional advances, we think this will be met by trade selling.December soybean meal remains on a short and intermediate term buy signal. We have no recommendation.

Soybean oil:

December soybean oil lost 77 points on volume of 76,237 contracts. Total open interest increased by 1478 contracts, which relative to volume is approximately 20% below average. The December contract accounted for loss of 349 of open interest. As this report is being compiled on November 4, December soybean oil is trading 83 points lower, down 2.41% compared to January soybeans being down 1.41% and December soybean meal up 0.83%. In short, December soybean oil is the weakest of the complex on November 4 and this undermines our confidence in the ability of soybean oil to generate an intermediate term buy signal.We have suggested that clients wait until December soybean oil generates an intermediate term buy signal before contemplating bullish positions. In order for this to occur, the low the day must be above OIA’s key pivot point for November 4 of 34.79.

Corn:

December corn lost 3.25 cents on volume of 262,911 contracts. Volume was the lowest since October 27 when December corn advanced 10.00 cents on volume of 249,545 contracts and total open interest declined by 7,162 contracts. On November 3, total open interest increased by a massive 10,749 contracts, which relative to volume is approximately 55% above average meaning that new aggressive shorts were entering the market in heavy numbers and driving prices lower. Making this even more impressive was the December contract, which lost 8,549 of open interest.

As this report is being compiled on November 4, December corn is trading 7.50 cents lower and has made a low of 3.64, which is the lowest print since 3.62 1/2 made on October 29.We think it is highly likely the 3.81 high made on October 30 is going to be the high for the move and that December corn will tend to drift lower.Originally, we thought it was possible for corn to rally to OIA’s key pivot point of 3.93 7/8, but this is clearly not in the cards. We have no recommendation.

Chicago wheat:

December Chicago wheat gained 5.75 cents on volume of 85,872 contracts. Total open interest declined by 142 contracts. The December contract accounted for loss of 4267 of open interest, which makes the minor decline of open interest somewhat friendly.Yesterday, the market made a high of 5.39 1/4 and as this report is being compiled on November 4 made a high of 5.38 3/4, but is trading 5.25 cents lower on the day.December Chicago wheat has struggled to generate an intermediate term buy signal, and if clients are contemplating bearish positions, the exit point would be if December Chicago wheat made a low above OIA’s key pivot point for November 4 of 5.43 1/2.

As we pointed out in yesterday’s report, there remains a large number of managed money shorts in Chicago wheat and therefore, this group represents a significant amount of buying power in the event that Chicago wheat generates an intermediate term buy signal.Also, next week the USDA releases its World Agriculture Supply Demand report and this could have an adverse effect on bearish positions.

WTI crude oil:

December WTI crude oil lost $1.76 on heavy volume of 727,522 contracts.Volume was the strongest since October 16 when 1,017,539 contracts were traded and December WTI closed at 81.95. On November 3, open interest increased by only 3,264 contracts, which relative to volume is approximately 80% below average. The December contract accounted for loss of 13,108 of open interest. We have found it remarkable that open interest has not been increasing by much during the massive decline in WTI prices. In our view, this may signal that prices are set to decline further than anyone currently thinks.

In the November 2 report, we mentioned that the new closing low of 32 cents premium to December 2014 in the December 2014-June 2015 spread was the lowest close since June 21, 2012 when June 2015 closed at a 6 cent premium to December 2014. Yesterday, this low was broken with June 2015 selling at a 12 cent premium to December 2014. Also, in the November 2 report, we targeted the December 2014 contract  to make a low of 77.56 if the spread between December 2014 and June 2015 continue to narrow. This is exactly what has occurred, and the 77.56 target turned out to be conservative. The low for the day on November 4 has been 75.84, which is the lowest print since October 2011 (74.95). Stand aside.

From the November 2 Weekend Wrap:

“In last weekend’s report, we warned clients about the breakdown of front months versus back months spreads and that this had negative implications for crude oil prices. This past week, the December 2014-June 2015 spread continued to narrow, and broke below the September 10 low of 43 cents premium to December 2014. It made a new closing low of 32 cents premium to December 2014.This is the lowest close since June 21, 2012 when December 2014 sold at a 6 cent discount to June 2015.”

“It appears the tightening of the spreads in 2014 is similar to what occurred in 2012. We do not think that WTI prices are at a bottom, and if the spread narrows further, and moves into contango, the next target for the December 2014 contract would be the 2012 low of 77.56. The market has been trading as if wants to go lower and has been unable to muster much of a rally.We continue to recommend a stand aside posture.”

Natural gas: On November 3, December natural gas generated a short-term buy signal, but remains on an intermediate term sell signal.

December natural gas advanced 17.3 cents on heavy volume of 387,968 contracts. Volume increased from October 31 when December natural gas advanced 4.6 cents on volume of 363,999 contracts and total open interest increased by 4,617 contracts. Additionally, volume was the highest since September 9 when 429,680 contracts were traded and December natural gas closed at 4.110.

On November 3, total open interest increased by a massive 17,303 contracts, which relative to volume is approximately 70% above average meaning that huge numbers of new longs were entering the market and driving prices to a new high for the move (4.065), which is the highest print since 4.087 made on October 6. However, yesterday’s high has been taken out in today’s trading with the December contract trading 12.2 cents higher and making a new high for the move at 4.179, which is the highest print since October 1 (4.246).

As clients know, after the generation of a buy signal, we recommend waiting for the market to pullback from 1-3 days, and this is the opportunity to initiate bullish positions. This is especially true in the case of natural gas, because the market is massively overbought on November 4 and can easily correct to the 5 day moving average of 3.940.

The natural gas storage report will be released Thursday morning at 10:30 a.m. EST, and this report generally has a major impact on natural gas prices in the short-term. Additionally, December natural gas is close to generating an intermediate term buy signal and will do so if the low the day is above OIA’s key pivot point for November 4 of 4.075. After the generation of an intermediate term buy signal, natural gas is likely to pullback if it hasn’t done so already. We want to emphasize, do not chase natural gas.

Coffee:

December coffee lost 2.15 cents on volume of 28,815 contracts. Total open interest declined again, this time by a massive 1,328 contracts, which relative to volume is approximately 75% above average meaning large numbers of market participants were liquidating on the decline. The December contract accounted for loss of 1,900 of open interest.

Beginning on October 27 through November 3, total open interest has declined every day and totals 5,715 contracts while December coffee lost 5.05 cents in this time frame. This is a healthy development because total open interest should be declining as prices decline.Yesterday, the July 2015-March 2016 spread widened by 30 ticks. Continue to hold the long July 2015-short March 2016 spread and exit upon penetration of the July 22 low of 3.10 cents premium to March 2016. As this report is being compiled on November 4, December coffee has closed up 2.55 cents.