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Soybeans:

January soybeans lost 20.00 cents on light volume of 202,929 contracts. Volume shrank from November 3 when January soybeans lost 19.50 cents on volume of 223,580 contracts and total open interest declined by 7,026 contracts.Additionally, volume was the lightest since October 3 when 183,432 contracts were traded and January soybeans closed at 9.20 1/2. On November 4, total open interest increased by 3,170 contracts, which relative to volume is approximately 35% below average. The November contract accounted for loss of 3717 of open interest, March 2015 -567, which makes the total open interest increase more impressive (bearish). As this report is being compiled on November 5, January soybeans are trading 3.25 cents lower and have made a daily low of 9.95 1/4, which is the lowest print since 9.73 1/4 made on October 27.

As we said in yesterday’s report, 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 5 of 10.43 7/8. Since the November 2014 contract entered 1st notice day, it has shown strength versus the January contract, and this may signal that a short-term rally is in the offing. January soybeans remain on a short-term buy signal, but an intermediate term sell signal.

Soybean meal:

December soybean meal lost 20 cents on volume of 107,063 contracts. Total open interest increased by a massive 5,451 contracts, which relative to volume is approximately 100% above average meaning a battle ensued between longs and shorts and neither side was able to move the market much by the close. December soybean meal made a low yesterday of 364.00, which is the lowest print since 346.00 made on October 27.Although the December 2014-January 2015 spread has pulled back from the high made on October 29 of 22.60, it continues to show strength, which is positive for soybean meal prices in the short-term. Although we think soybean meal has topped out, we strongly advise against initiating bearish positions.

Soybean oil:

December soybean oil lost 96 points on volume of 108,047 contracts. Total open interest increased by 2,161 contracts, which relative to volume is approximately 20% less than average. The December contract accounted for loss of 1,176 of open interest, which makes the total open interest increase more impressive (bearish). As this report is being compiled on November 5, December soybean oil is trading down 38 points and has made a daily low of 32.32, which is below OIA’s key pivot point of 32.36. If December soybean oil makes a daily high below this pivot point, a short-term sell signal would be generated, which would reverse the short-term buy signal generated on October 30. After generating the short-term buy signal on October 30, December soybean oil has corrected for 3 days, and if the buy signal is to hold, the market should begin to rally.From October 30, when December soybean oil generated a short-term buy signal through November 4, the bean oil contract is down 3.61% versus December soybean meal, which is lost 1.97% and January soybeans which lost 1.94% in the same time frame. In short, soybean oil is losing disproportionately to meal and beans on the pullback, which is not a good sign.

Corn:

December corn lost 9.00 cents on volume of 299,948 contracts. Volume increased from November 3 when December corn lost 3.25  cents on volume of 262,911 contracts and total open interest increased by 10,749 contracts. On November 4, total open interest increased again, this time by 6,080 contracts, which relative to volume is approximately 20% below average. However, the December contract accounted for loss of 15,278 of open interest, which makes the total open interest increase more impressive (bearish). As this report is being compiled on November 5, December corn is trading 6.25 cents higher.As stated in yesterday’s report, 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. The fact remains, farmers have large inventories of corn to sell and this is going to keep a lid on rallies despite December corn being on a short and intermediate term buy signal. We have no recommendation.

Chicago wheat:

December Chicago wheat lost 7.75 cents on volume of 74,305 contracts. Total open interest increased by 803 contracts, which relative to volume is approximately 50% below average. The December contract lost 3,154 of open interest, which makes the total open interest increase more impressive (bearish). As this report is being compiled on November 5, December Chicago wheat is trading 4.25 cents lower and has made a daily low of 5.18 3/4, which is the lowest print since 5.10 1/2 made on October 27.

We like the bearish side of Chicago wheat, but as we indicated in yesterday’s report, our only concern is the large number of managed money shorts, which represent significant buying power if in fact the market generates an intermediate term buy signal. If clients are contemplating bearish positions, the exit point would be if December Chicago wheat makes a low above OIA’s key pivot point for November 5 of 5.43 1/4.

WTI crude oil:

December WTI crude oil lost $1.59 on volume of 867,239 contracts.Volume increased from November 3 when December WTI lost 1.76 on volume of 727,522 contracts and total open interest increased by 3,264 contracts. Additionally, volume was the highest since October 16 when 1,017,539 contracts were traded and December WTI closed at $81.95. On November 4, total open interest increased by 7,317 contracts, which relative to volume is approximately 60% less than average. The December contract accounted for loss of 4,013 of open interest, which makes the minor increase of open interest more impressive (bearish).As we have pointed out consistently, open interest increases on price declines are significantly below average even during days when the market declines precipitously. In our view, this represents a lack of conviction that prices are headed lower, which makes it all the more likely that prices are headed lower. Stand aside

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 0.5 million barrels from the previous week. At 380.2 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Total motor gasoline inventories decreased by 1.4 million barrels last week, and are below the lower limit of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories decreased by 0.7 million barrels last week and are near the lower limit of the average range for this time of year. Propane/propylene inventories fell 0.1 million barrels last week but are well above the upper limit of the average range. Total commercial petroleum inventories decreased by 2.4 million barrels last week.

Natural gas: December natural gas will generate an intermediate term buy signal on November 5 after generating a short-term buy signal on November 3.

December natural gas advanced 8.9 cents on very heavy volume of 448,259 contracts.Volume was the strongest since June 12 when 533,085 contracts were traded and December natural gas closed at $4.836. On November 4, total open interest declined by 3,475 contracts, which relative to volume is approximately 55% below average, however liquidation was the dominant action on the advance as the market traded to a new high for the move of 4.179 on November 4.The December contract accounted for loss of 6,397 of open interest.

As this report is being compiled on November 5, December natural gas is trading 6.1 cents higher and has made a daily high of 4.315, which is the highest print since 4.327 made on July 9. This high was made in the early morning hours, approximately 6:00 a.m. EST, and the market has been drifting lower ever since. December natural gas has advanced every day since October 29, and remains massively overbought.The strength of the market is best evidenced by the fact that the low the day has been 4.132, which is above yesterday’s close of 4.129. As we stated in yesterday’s report, clients should not chase this rally. Natural gas is one of the most volatile commodities traded and could easily pull back 20 cents before resuming its uptrend. 

Cotton:

December cotton lost 1.45 cents on heavy volume of 33,397 contracts.Volume was the strongest since September 10 when 34,978 contracts were traded and December cotton closed at 67.14. On November 4, total open interest declined by a massive 3,739 contracts, which relative to volume is approximately 340% above average meaning that liquidation was off the charts heavy. The December contract lost 4,161 of open interest, March 2015 -258. On October 29, December cotton generated a short-term buy signal and has been on an intermediate term sell signal. It appears imminent that a short-term sell signal will be triggered. This will occur if the high of the day is below OIA’s key pivot point for November 5 of 62.74.

With respect to the extract from the October 29 report (below), it should be noted that December cotton was unable to make a daily low above OIA’s key pivot point of 65.72, let alone generate an intermediate term buy signal.

From the October 29 report:

“For December cotton to continue its advance, it must make a daily low above OIA’s key pivot point for October 30 of 65.72, and will generate an intermediate term buy signal if the low the day is above OIA’s key pivot point for October 30 of 66.73. Due to burdensome stock levels globally, and weak demand, we cannot recommend bullish positions.”

Live cattle: December live cattle is getting close to generating a short-term sell signal.

Copper: December copper will generate a short-term sell signal on November 5, which reverses the short-term buy signal generated on October 29. December copper remains on an intermediate term sell signal.

Coffee: December coffee will generate an intermediate term sell signal on November 5 after generating a short-term sell signal on October 23.

December coffee advanced 2.35 cents on volume of 35,735 contracts. Volume was the highest since October 30 when December coffee lost 2.00 cents on volume of 42,062 contracts and total open interest declined by 934 contracts. On November 4, total open interest declined by a massive 1,218 contracts, which relative to volume is approximately 40% above average meaning that liquidation was substantial on the modest advance. The December contract accounted for loss of 2,819 of open interest. Yesterday, the July 2015-March 2016 spread lost 65 ticks to close at 2.45 cents premium to March 2016. Based upon the close, the spread has narrowed another 20 ticks. We advise clients to exit the spread upon the penetration of 3.10 cents premium to March 2016.