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Soybeans:

January soybeans advanced 13.25 cents on volume of 236,195 contracts. Volume was the lowest since October 9 when soybeans advanced 7.00 cents on volume of 231,580 contracts and total open interest increased by 4,306 contracts. On October 16, total open interest increased just 1,212 contracts, which relative to volume is approximately 75% below average. The November contract lost 4,238 of open interest, which makes the minor increase of open interest more impressive (bullish). However, yesterday’s action is a disappointment in terms of the price advance and open interest increase, which was accompanied by light volume. In short, yesterday’s rally  was of low-quality and without conviction.

On October 16, January soybeans made a high of 9.75 1/4, which is below the high of 9.87 made on October 15 when soybeans closed 12.25 cents lower. As this report is being compiled on October 17, January soybeans are trading 13.25 cents lower after making a daily high of 9.80 1/2. On October 1, January soybeans made their contract low at 9.12 1/4, and it appears that a test of this low is imminent. Thus far, January soybeans have been unable to make a low above OIA’s key pivot point of 9.77 3/4, which would trigger a short-term buy signal. Harvest pressure will continue to weigh on prices, and on any rally, we suggest writing out of the money calls in the January contract.We recommend that short calls be exited upon the generation of a short-term buy signal.

The USDA reported sales of 935.01 thousand metric tons, which brings total commitments to an amazing 1.1246 billion bushels versus the USDA projections for the entire season, which ends on August 31, 2015 of 1.700 billion bushels. As of the latest report, 66% of the export projection by the USDA has already been committed.

Soybean meal: On October 16, December meal generated a short-term buy signal, but remains on an intermediate term sell signal.

December soybean meal advanced $7.30 on heavy volume of 127,084 contracts.Volume was the strongest since September 11 when 128,146 contracts were traded and December soybean meal closed at a $329.20.On October 16, total open interest declined by 3,798 contracts, which relative to volume is approximately 20% above average meaning that liquidation was heavier than usual on a very strong advance in the December contract. The December contract lost 6,553 of open interest. From October 6 through October 16, December soybean meal has rallied every day with the exception of October 8 and 10.From October 6 through October 16, December soybean meal has rallied $35.80 and therefore the open interest decline in yesterday’s trading is not unexpected.Usually, after the generation of a buy signal, the market has a tendency to pullback from 1-3 days, and this is the opportunity to initiate bullish positions. We recommend waiting for a pullback for another day or two before contemplating bullish positions.

Soybean oil: Liquidate the May 2015-December 2015 soybean oil bull spread. This will be our last report in soybean oil until we see a trading opportunity or a change of signal.

December soybean meal advanced 38 points on volume of 94,441 contracts. Total open interest declined by 775 contracts, which relative to volume is approximately 60% below average. The December contract accounted for loss of 1,283 of open interest. Yesterday, the May 2015-December 2015 spread widened by 6 points.As this report is being compiled on October 17, the May 2015-December 2015 spread has narrowed by 4 points. It appears that Malaysian palm oil is on the verge of generating a short-term sell signal, and therefore we suggest the liquidation of the soybean oil spread in today’s trading.

Corn:

December corn advanced 4.75 cents on volume of 200,307 contracts. Volume was below that of October 13 when December corn advanced 12.00 cents on volume of 205,767 contracts and total open interest increased by 4,906 contracts. The December contract accounted for loss of 10,854 of open interest. December corn made its high for the move at 3.58 1/4 on October 15, but closed 9 1/2 cents lower on volume of 268,621 contracts and total open interest declined by 5407 contracts.

On October 14, December corn advanced 11.00 cents on volume of 298,294 contracts and total open interest declined by 3,188 contracts. In other words, for the past two days, we are seeing a pattern of advances to new highs for the move but without increases of open interest. December corn cannot close at the highs and then go on to make new highs. Additionally, December corn has not been able to make a low above OIA’s key pivot point for October 17 of 3.49 1/2.

Today’s, pivot point has increased from the October 14 pivot point of 3.48 7/8. Although December corn generated a short-term buy signal on October 9, market action since then has been unimpressive. Like soybeans, we think lower prices are ahead. December corn made its contract low on October 1 of 3.18 1/4 and has made a high of 3.58 1/4, or a 40 cent rally. We recommend writing out of the money calls in December corn on any rally.This position should be liquidated if December corn makes a low above OIA’s key pivot point of 3.49 1/2

From the October 14 report:

“On October 14, December corn made a high of 3.57 1/2, and as this report is being compiled on October 15, December corn has made another new high at 3.58 1/4. Thus far in trading, the low has been 3.46 1/2, which is below OIA’s key pivot point of 3.48 7/8. We still think the market remains vulnerable to more downside after more short sellers have been blown out of the market. Stand aside.”

The USDA reported huge sales of 1,922.8 thousand metric tons bringing total commitments to date of 678 million bushels versus USDA projections for the season, which ends on August 31, 2015 of 1.750 billion bushels. The sale reported this week is by far the highest of the season and more than double the best weekly sale thus far.

Chicago wheat: December Chicago wheat will generate a short-term buy signal on October 17.

December Chicago wheat advanced 11.00 cents on low volume of 65,316 contracts. Volume was the lowest since October 14 when December Chicago wheat advanced 4.00 cents on volume of 53,887 contracts and total open interest increased by 653 contracts. On October 16, total open interest increased by 764 contracts, which relative to volume is approximately 45% below average. The December contract lost 246 of open interest, which makes the minor increase of open interest more impressive (bullish).We view the rally in December Chicago wheat much like corn and soybeans: they are rallies in bear markets. It will be interesting to see how December Chicago wheat trades on Monday, and we advise waiting until next week before contemplating bearish positions.

Kansas City wheat: December Kansas City wheat will generate a short-term buy signal on October 17.

December Kansas City wheat advanced 13.00 cents on volume of 23,723 contracts. Total open interest declined by a substantial 689 contracts, which relative to volume is approximately 20% above average meaning that liquidation was above average, even though prices advanced strongly. This continues a pattern of open interest declines and from October 9 through October 15, Kansas City wheat advanced in price, total open interest declined by 2317 contracts in this time frame.

The USDA reported weekly sales of 454 thousand metric tons bringing total commitments to 528.9 million bushels versus USDA projections for the season, which ends on Made 31 2015 of 925 million bushels.

WTI crude oil:

November WTI crude oil advanced 92 cents on huge volume of 1,017,539 contracts.Volume declined from October 15 when 1,100,618 contracts were traded and November WTI lost 6 cents and total open interest increased by 8,436 contracts. On October 16, total open interest declined by 30,009 contracts, which relative to volume is approximately 20% above average meaning that liquidation was extremely heavy on the advance. The November contract accounted for loss of 40,463 of open interest. November WTI made a contract low of 79.78 and then proceeded to rally strongly to a high of 84.83, but then sold off to close modestly higher. As this report is being compiled on October 17, December WTI is trading 29 cents higher after making a high of 83.74. December WTI crude oil remains on a short and intermediate term sell signal. Stand aside.

Natural gas:

November natural gas lost 4 ticks on volume of 255,950 contracts. Total open interest declined by 653 contracts, which is minuscule and dramatically below average. The November contract accounted for loss of 10,233 of open interest. Yesterday, November natural gas made a new low for the move at 3.744, and as this report is being compiled on October 17, has made another new low at 3.715, down 3.4 cents. Yesterday, we recommended the liquidation of the long February 2015-short May 2015 bull spread, and clients should be on the sidelines. We think the spread can work, but natural gas must begin to exhibit strength, and we don’t think this is going to occur until temperature throughout the midwest and eastern seaboard begin to drop significantly.On October 10, November natural gas generated a short-term sell signal after being on an intermediate term sell signal.

Gold:

December gold lost $3.60 on volume of 184,412 contracts. Total open interest declined by only 362 contracts. As this report is being compiled on October 17, December gold is trading $2.50 lower and has made a daily low of 1232.00, which is below OIA’s key pivot point for October 17 of 1236.90.In order for December gold to generate a short-term buy signal, the low the day must be above the pivot point. Stand aside.

Cocoa:

December cocoa lost $67.00 on volume of 24,500 contracts. Volume declined somewhat from October 15 when December cocoa advanced 51.00 on volume of 25,389 contracts and total open interest increased by 127 contracts. On October 16, total open interest declined by a massive 1176 contracts, which relative to volume is approximately 75% above average meaning that liquidation was extremely heavy on the decline.As this report is being compiled on October 17, December cocoa has closed at 3118, up 32.00. The March 2015-December 2015 spread has widened 4.00. Continue to hold the spread, but exit the position upon penetration of the October 7 low of 46.00 premium to March 2015.December cocoa remains on a short and intermediate term sell signal.

Coffee:

December coffee advanced 1.10 cents on volume of 16,804 contracts. Total open interest increased by a massive 2573 contracts, which relative to volume is approximately 425% above average. Additionally, the open interest increase on October 16 was the largest since since October 3 when December coffee lost 2.10 cents on volume of 25,105 contracts and total open interest increased by 2,638 contracts. However, on a day when prices advanced, the largest total open interest increase occurred on October 1 when December coffee advanced 7.05 cents on volume of 28,097 contracts and total open interest increased by 2,918 contracts.In summary, the massive open interest increase on the modest rally indicates to us that commercial sellers were on the short side of the trade while speculators were most likely on the buy side.

As this report is being compiled, December coffee has closed at $2.1065, down 6.45 cents. Additionally, December coffee has made a new low for the move at 2.0850, which takes out the previous low print made on October 6 of 2.0870.For December coffee to generate a short-term sell signal, the high of the day must be below OIA’s key pivot point for October 17 of 1.9940.Although we think coffee prices are headed higher, the resistance at the 2.25 level, is a barrier the market has been unable to overcome.We think that further declines are likely ahead and this will undoubtedly pressure the long July 2015-short March 2016 spread.If the July contract loses its premium to March 2016, we think it is wise to liquidate the spread and look to initiate it again under more favorable circumstances. There are large numbers of speculative longs in the market, and it is apparent they have not liquidated on price advances or declines. If coffee begins to decline in a significant way, the forced liquidation by speculative longs could take the market much lower than anyone thinks.