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Soybeans:

November soybeans lost 19.50 cents on heavy volume of 375,878 contracts. Volume was the strongest since February 27, 2014 when November soybeans closed at $11.55 1/2. Additionally, volume traded on Friday was the second-highest of 2014. On October 10, total open interest increased by a massive 18,595 contracts, which relative to volume is approximately 95% above average meaning that aggressive new short sellers were entering the market in heavy numbers. The November contract lost 2,160 of open interest, which makes the total open interest increase more impressive (bearish).

We examined our records going back to August 1, and could not find 1 day when open interest increased by nearly 18,000 contracts. This included days when soybeans advanced and declined. In short, the massive increase of open interest on Friday’s price decline accompanied by heavy volume, may have been the result of johnny-come-lately’s getting bearish at the low end of the trading range. As this report is being compiled on October 13, November soybeans are trading 22.75 cents higher and have made a daily high of 9.51, which is slightly above Friday’s high of 9.50.November soybeans remain on a short and intermediate term sell signal. Stand aside.

Soybean oil:

December soybean oil lost 57 points on heavy volume of 161,175 contracts. Volume was the strongest since February 13 when 190,825 contracts were traded and December soybean oil closed at 39.38. Additionally, volume on October 10 was the 3rd highest of 2014. On October 10, total open interest increased by 1,423 contracts, which relative to volume is approximately 55% less than average. The October contract accounted for loss of 115 of open interest, December 2014 -7068, which makes the total open interest increase more impressive (bearish). As this report is being compiled on October 13, December soybean oil is trading 54 points higher after making a daily low of 32.24, which is above Friday’s low of 32.15. We continue to like the long May 2015-short December 2015 soybean oil bull spread. In order for the December contract to generate a short-term buy signal the low the day must be above OIA’s key pivot point for October 13 of 33.09. December soybean oil remains on a short and intermediate term sell signal.

Corn:

December corn lost 10.75 cents on heavy volume of 349,869 contracts. Volume took out the previous recent high of 331,965 contracts traded on October 7 when December corn advanced 8.00 cents and total open interest increased by 4,467 contracts. On October 10, total open interest declined by a 9,744 contracts, which relative to volume is average.The December contract accounted for loss of 11,491 of open interest, March 2015 – 3112. The decline is healthy after generating the short term buy signal.

On October 10, December corn made a low of 3.32 1/2, and when the market opened for the evening session on Sunday, made another low of 3.30 1/2, and has been rallying steadily ever since. On October 9, December corn generated a short-term buy signal, and after doing so had a 1 day pullback, which is typical after the generation of a buy signal. As we pointed out in the October 9 report, December corn must close above OIA’s key pivot point of 3.48 7/8 and then make a daily low above the pivot point for the rally to continue.

From the October 9 report:

“Typically, after the generation of a buy signal, the market has a tendency to pullback from 1-3 days and this is the opportunity to enter bullish positions if you are so inclined.However, in order for December corn to continue its advance, it must close above OIA’s key pivot point of 3.48 7/8, and then make a daily low above this pivot point.For the short-term buy signal to reverse, the high of the day must be below OIA’s key pivot point of 3.31 7/8. At this juncture, we advise a stand aside posture.”

Chicago wheat:

December Chicago wheat advanced 5.25 cents on volume of 112,735 contracts. Volume picked up substantially from October 9 when December wheat lost 14.50 cents on volume of 93,530 contracts and total open interest increased by 1,368 contracts.Additionally, volume was the highest since September 3 when 116,346 contracts were traded and December Chicago wheat closed at 5.35 3/4. On October 10, total open interest increased only 51 contracts. The December contract accounted for loss of 496 of open interest, May 2015-2076, which makes the very minor increase of open interest somewhat more positive.

As this report is being compiled on October 13, December Chicago wheat is trading 1.50 cents higher and has made a daily high of 5.06 1/2, which is below Friday’s high of 5.08 1/2. In order for December Chicago wheat to continue its rally, it must close above OIA’s key pivot point for October 13 of 5.11 1/2, then make a daily low above it to generate a short-term buy signal.

WTI crude oil:

November WTI crude oil advanced 5 cents on heavy volume of 811,323 contracts. Volume increased from October 9 when November WTI lost $1.54 on volume of 768,424 contracts and total open interest increased by 11,268 contracts. Volume was below that of October 8 when November WTI also lost 1.54 on volume of 841,744 contracts and total open interest increased by 6,723 contracts. On October 10, total open interest declined by 6952 contracts, which relative to volume is approximately 60% below average. The November contract accounted for loss of 17,399 of open interest.

On Friday, November WTI made a new contract low at 83.59, and as this report is being compiled on October 13 has made a daily low of 84.07 and is currently trading 45 cents lower on the day.It is positive that WTI was able to hold above Friday’s low, especially since equities were sharply lower throughout the evening session.In the October 12 Weekend Wrap, we discussed the bullish spread action, and continue to think the market is not quite as bearish as most people believe.

Brent crude oil:

December Brent crude oil advanced 21 cents on volume of 884,751 contracts.Total open interest increased by 20,483 contracts, which relative to volume is approximately 10% below average. The November contract accounted for loss of 14,603 of open interest, which makes the total open interest increase neutral (the increase of open interest was not moving prices lower).. December Brent crude oil remains on a short and intermediate term sell signal.

Natural gas: On October 10, November natural gas generated a short-term sell signal, and remains on an intermediate term sell signal.

November natural gas advanced 1.4 cents on light volume of 213,579 contracts. Total open interest increased by 5,827 contracts, which relative to volume is average. The November contract accounted for loss of 14,780 of open interest, which makes the total open interest increase more impressive (slightly bullish). As we’ve said before, the performance of natural gas has been disappointing, but it is difficult to get very bearish at current levels. The February 2015-May 2015 spread has widened by 2 cents on October 13 and we continue to like the spread. It is a relatively low risk way of trading natural gas despite it being on a short and intermediate term sell signal.

Cocoa:

December cocoa advanced $100.00 on heavy volume of 32,349 contracts. Volume was the strongest since October 2 when December cocoa lost 82.00 on volume of 33,058 contracts and total open interest declined by 4,326.On October 10, total open interest increased by 951 contracts, which relative to volume is approximately 15% above average meaning that new longs were entering the market at an above average rate and driving prices to a new high for the move (3,172). The December contract accounted for loss of 1,288 of open interest, which makes the total open interest increased more impressive (bullish).

However, on October 13 it is a completely different story and December cocoa has reversed sharply and closed at 3,059, down $98.00. We consider this reversal to be bearish with the high on October 13  of 3,208, which is only slightly above OIA’s key pivot point of 3,205. On October 10, the March 2015-December 2015 spread widened by 27.00 and by today’s close has lost $22.00.

While we are not quite ready to throw in the towel on the spread, today’s action may indicate a test of 3,019 made on September 11 is in the cards. The spread may narrow a bit more, but should not fall apart. The low for the spread occurred on September 15 with March 2015 cocoa selling at a $20.00 premium to December 2015.On October 13 the spread closed at $57.00 premium to March 2015. December cocoa remains on a short and intermediate term sell signal.

Coffee:

December coffee lost 1.25 cents on volume of 17,251 contracts. Volume declined from October 9 when December coffee advanced 7.20 cents on volume of 19,401 contracts and total open interest increased by 1,567 contracts. On October 10, total open interest increased by 1,350, which relative to volume is approximately 210% above average meaning that aggressive new longs and shorts were entering the market in heavy numbers , but the shorts were driving prices lower. The March 2015 contract lost 146 of open interest, May 2015-171, which makes the total open interest increase more impressive (bearish).

We are concerned about the action on October 8 when coffee lost 1.90 cents and total open interest increased by 2,081 contracts on volume of 29,898. In summary, during 2 of the past 3 trading days, coffee prices have declined while open interest increased by a substantial amount. It appears there may be a fair amount of trade selling at the high-end of the range.As this report is being compiled on October 13, December coffee is closed at $2.1810, down 2.30 cents. During the week of October 6, December coffee made a high of 2.2550, and thus far on Monday the high has been 2.2545. It appears coffee may pull back from here, before making a new assault on the contract high.We continue to like the long July 2015-short March 2016 bull spread, and on October 13, the spread has widened by 25 points.