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Soybeans:

November soybeans advanced 7.75 cents on volume of 182,768 contracts. Volume declined from October 1 when November soybeans advanced 3.50 cents on volume of 197,221 contracts and total open interest declined by 2,480 contracts. On October 2, total open interest increased by 983 contracts, which relative to volume is approximately 75% below average. The November contract lost 2,829 of open interest, which makes the minor increase of open interest somewhat bullish. As this report is being compiled on October 3, November soybeans are trading 11.25 cents lower after making a daily high of 9.27 3/4, which is slightly above yesterday’s high of 9.25 1/2. Stand aside.

Soybean oil:

December soybean oil closed unchanged on volume of 73,245 contracts. Total open interest declined by 2,688 contracts, which relative to volume is approximately 40% above average meaning that liquidation was heavy on the narrow range day.Liquidation was across the board with October losing 671 of open interest, December -2059, January 2015 -283, March 2015 -622. As this report is being compiled on October 3, December soybean oil is trading 13 points lower. Longer-term, we like the prospects of soybean oil, and think it will work its way higher once soybeans have found stability. December soybean oil remains on a short and intermediate term sell signal. Stand aside.

Corn:

December corn advanced 1.50 cents on volume of 198,882 contracts. Volume increased from October 1 when December corn advanced 0.50 cents on volume of 171,350 contracts and total open interest increased by 2,219 contracts. On October 2, total open interest increased by 2,708 contracts, which relative to volume is approximately 40% less than average. The December contract accounted for loss of 1,939 of open interest. As this report is being compiled on October 3, December corn is trading 0.25 lower, and has not taken out the contract low of 3.18 1/4 made on October 1. Stand aside.

Chicago wheat:

December Chicago wheat gained 3.75 cents on volume of 78,693 contracts. Volume increased from October 1 when December Chicago wheat gained 1.25 on volume of 68,986 contracts and total open interest increased by 1,835 contracts.On October 2, total open interest increased by 1,735 contracts, which relative to volume is approximately 10% below average, but an open interest increase on a price advance has been a rare event in Chicago wheat. The December contract lost 1,157 of open interest, which makes the total open interest increase more impressive (bullish). As this report is being compiled on October 3, December Chicago wheat is trading 0.50 cents lower and has made a daily high of 4.89, which is slightly below yesterday’s high of 4.89 3/4. December Chicago wheat remains on a short and intermediate term sell signal. Stand aside.

Live cattle:

December live cattle advanced 52.5 points on volume of 54,371 contracts. Total open interest declined by 1,062 contracts, which relative to volume is approximately 20% below average. The October contract accounted for loss of 1,495 of open interest, December -1,821. As this report is being compiled on October 3, December live cattle has made a new all-time high at 1.67675, which takes out yesterday’s all-time high of 1.66950, but is trading 452.5 points lower on the day.If clients feel compelled to the involved on the long side of cattle in futures, we recommend doing it via a bull spread: buying December 2014 and selling February 2015, or April 2015.

WTI crude oil:

November WTI crude oil advanced 28 cents on extremely heavy volume of 1,004,463 contracts. Volume was the strongest since July 17 when 1,135,765 contracts were traded and November WTI crude oil closed at $100.29. On October 2, total open interest increased only 1,374 contracts, which relative to volume is minuscule and dramatically below average. The November contract accounted for loss of 5,925 of open interest. Yesterday, November WTI made a new low for the move at 88.15, which took out the previous low of 89.56 made on September 11 and is only 30 cents above its contract low of 87.85. As this report is being compiled on October 3, November WTI is trading $1.46 lower and has made a daily low of 89.36.

From the September 29 report:

November WTI will continue its down trend if the high for the day is below OIA’s key pivot point of 92.36, which makes it highly vulnerable to test the September 11 low of 89.56.. Stand aside.

Brent crude oil:

November Brent crude oil lost 74 cents on relatively heavy volume of 829,347 contracts. Total open interest increased by 12,609 contracts, which relative to volume is approximately 40% below average. The November contract lost 3,083 of open interest, which makes the total open interest increase more impressive (bearish). Yesterday, November Brent made a new contract low of 91.55, and as this report is being compiled on October 3, has made another contract low of 91.48. The November Brent contract currently is trading $1.60 lower on the day and is trading at levels last seen during the week of June 25, 2012 when Brent crude oil made a low of 89.60. Stand aside.

Natural gas:

November natural gas lost 9.1 cents on volume of 285,505 contracts. Total open interest declined by 3,159 contracts, which relative to volume is approximately 50% below average. The November contract accounted for loss of 7,792 of open interest. As this report is being compiled on October 3, November natural gas is trading 7.9 cents higher and has recovered almost all the ground lost in yesterday’s trading.This is impressive considering the pattern of past performance after the release of the EIA storage report and prices decline. We would be far more enthusiastic about natural gas if commodities were not in a massive deflationary cycle, and if natural gas prices could breakout of the range of  the past several months. When weather turns cold, this should be the catalyst for the breakout.

For those clients who are not yet involved in natural gas, we recommend the initiation of new bull call spreads, using yesterday’s low of $3.908 as an exit point for the position. Those of you who initiated bull call spreads previously should to hold the position.

10 Treasury Note:

The December Treasury Note declined by 6.5 points on volume most 1,772,265 contracts. Total open interest declined by 21,326 contracts, which relative to volume is approximately 45% less than average. As this report is being compiled after the release of the employment report, the December Note is trading 7.5 points lower and has made a daily low of 124-260 which is the lowest print since October 1 (124-220). Although, the December note remains on a short and intermediate term sell signal, this status could change due to the likelihood of a continued decline in equities and this is why we recommend against bearish positions

Dollar Index:

The December dollar index lost 38.6 points on volume of 53,442 contracts. Total open interest declined by a massive 6,066 contracts, which relative to volume is approximately 340% above average meaning that liquidation was off the charts heavy on a rather modest decline.We were looking forward to another day or two of declines in order to recommend bullish positions. However, on October 3, the December dollar index is trading up sharply +1.095 points, or +1.28% and has made a new contract high of 86.870.The December euro is trading 1.27% lower, or -1.61 cents while the December pound is trading -1.12%, or -1.80 cents below yesterday’s close. The dollar index remains on a short and intermediate term buy signal. Stand aside.

Cocoa: On October 2, December cocoa generated a short and intermediate term sell signal.

December cocoa lost $82.00 on volume of 33,058 contracts. Volume fell from October 1 when December cocoa lost 128.00 on volume of 43,525 contracts and total open interest declined by 4,731 contracts. On October 2, total open interest declined massively again, this time by 4,326 contracts, which relative to volume is approximately 420% above average meaning that liquidation was off the charts heavy. The December contract accounted for loss of 5,034 of open interest.

As this report is being compiled on October 3 after the close of cocoa, the December contract lost $24.00, and has made a new low for the move of 3,050, which is the lowest print since September 16 (3,046). Due to the headlines regarding the Ebola virus, market participants piled into cocoa prematurely. As we have said before, the bull move in cocoa is not over, however, the next time cocoa begins to rally, market participants will likely be hesitant to rush into the market due to being burned by the rally from September 12 through September 24. As a result, the next move higher may be a much more sustainable.

Although many speculators were rushing into the market, especially at the top, we were warning clients to stay away from cocoa and cited our reasons for this in the September 29 report.

From the September 29 report:

“For the past 2 days, we’ve seen massive increases of open interest, but this massive increase is not moving prices higher. As a matter of fact prices have been moving lower during the past 2 days with December cocoa losing $22.00. On September 26, December cocoa lost 22.00 on volume of 22,695 contracts and total open interest increased by 2826 contracts. During the past 2 days, total open interest has increased by 5,780 contracts and cocoa prices have fallen. We consider this to be a red flag and strongly advise a sideline stance, especially because December cocoa remains massively overbought.”

Coffee:

December coffee advanced 8.20 cents on very heavy volume of 42,359 contracts.Volume was the strongest since August 7 when December coffee lost 6.70 cents on volume of 42,271 contracts. Interestingly, the December contract lost 4 of open interest and there were open interest increases across the board from March 2015 forward. Yesterday, December coffee made a high of 2.1375, which is the highest print since April 23 when the May contract made its high of 2.1570.As this report is being compiled on October 3, December coffee has closed 2.10 cents lower. In the upcoming Weekend Wrap, we will be exploring some bullish strategies for trading coffee in the months ahead. We recommend waiting for a further pullback before considering bullish positions. December coffee generated a short and intermediate term buy signal on October 1.

S&P 500 E mini: On October 2, the December S&P 500 E mini generated a short and intermediate term sell signal.

The S&P 500 E mini lost 2.25 points on heavy volume of 2,725,793 contracts.Volume was the strongest since September 16 when 2,966,696 contracts were traded and the December E mini closed at 1991.50. On October 2, total open interest declined by 38,919 contracts, which relative to volume is approximately 45% below average.

As this report is being compiled on October 3, the December E mini is trading 20.75 points higher on very low volume after the release of the employment report by the US Department of Labor. We are seeing a normal counter trend rally on October 3 after the generation of sell signals on October 2.

In order for the short-term sell signal to reverse, the low the day must be above OIA’s key pivot point for October 3 of 1980.40 and for the intermediate term sell signal to be reversed, the low the day must be above OIA’s key pivot point for October 3 of 1962.80.