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Soybeans: Liquidate the short call position in January soybeans.

January soybeans lost 2.00 cents on very heavy volume of 366,198 contracts. Volume was the strongest since October 14 when soybeans advanced 19.50 cents on volume of 402,225 contracts and total open interest declined by 9,432 contracts. On October 22, total open interest declined by 11,728 contracts, which relative to volume is approximately 30% above average meaning that liquidation was heavy on the modest decline. The November contract lost 15,924 of open interest, March 2015 -605. Soybeans rallied to a high of 9.90, and then proceeded to sell off, and  this was accelerated with the decline of soybean meal.

As this report is being compiled on October 23, January soybeans are trading 27.25 cents higher, and the catalyst for this is the terrific export sales report released by the USDA. For a short-term buy signal to occur, the low the day must be above OIA’s key pivot point for October 23 of 9.78. Tomorrow soybeans should generate the short-term buy signal. The very robust export sales picture is now taking a front row seat, and the specter of a much larger crop is taking a backseat for now.

USDA reported sales of 2166.84 thousand metric tons bringing total commitments to 1.204.2 billion bushels versus USDA projections for the entire season, which ends on August 31, 2015 of 1.700 billion bushels. As of the latest report, 71% of the projected sales for 2014-2015 by the USDA have already been committed. This is the best start of the season since crop years 2008-2009. China was the big buyer as usual.

Soybean meal:

December soybean meal lost $4.90 on very heavy volume of 164,795 contracts. Remarkably, volume was the strongest of 2014 and was the highest since November 22, 2013 when 170,480 contracts were traded and December soybean meal closed at a $348.80.On October 22, total open interest declined by 5,023 contracts, which relative to volume is approximately 20% above average. The December contract accounted for loss of 5,977 of open interest, January 2015 -1,700.

December soybean meal made a high yesterday of 353.60, and then sold off sharply in what appeared to be trade selling. As this report is being compiled on October 23 December soybean meal has made a daily high of 353.00 and is trading $12.75 higher.We have no official recommended position in soybean meal.On October 16, December soybean meal generated a short-term buy signal, and though it is sharply higher on October 23 will not generate an intermediate term buy signal because the low the day (335.10) is below OIA’s key pivot point for October 23 of $338.60.

The USDA reported sales of 23.04 thousand metric tons, which brings total commitments to 6245.45 thousand metric tons versus USDA projections for the season of 12,000 thousand metric tons. 52% of the crop has already been committed and this is the best start of the season since crop years 2009-2010.

Corn:

December corn lost 3.00 cents on volume of 267,963 contracts. Volume increased somewhat from October 21 when December corn advanced 7.75 cents on volume of 247,581 contracts and total open interest increased by 5,093 contracts. On October 22, total open interest declined by 3,139 contracts, which relative to volume is approximately 45% less than average. The December contract accounted for loss of 13,605 of open interest. Yesterday, December corn made a new high for the move at 3.61, which is the highest print since 3.62 3/4 made on September 3.

As this report is being compiled On October 23, December corn has made a daily high of 3.60 and is trading 5.50 cents higher.Yesterday, December corn held above yesterday’s low of 3.52 1/4, and therefore the short call position was abandoned because it was above OIA’s key pivot point of 3.49 5/8. For the rally to continue, the next key pivot point for October 22 is 3.58, and December corn must make a low above it. December corn will generate an intermediate term buy signal if the low for the day is above OIA’s key pivot point for October 23 of 3.65 1/2. At this juncture, we have no recommended position.

The USDA reported very strong sales of 1031.2 thousand metric tons bringing total commitments for the season to date of 718.6 million bushels versus USDA projections for the season of 1.750 billion bushels. This week’s sale was the second-highest of the season, which began on September 1.

Chicago wheat:

December Chicago wheat advanced 3.00 cents on volume of 78,436 contracts. Total open interest increased by a substantial 3,665 contracts, which relative to volume is approximately 75% above average meaning that new longs were entering the market in heavy numbers and driving prices to a new high for the move (5.28 3/4). The December contract lost 415 of open interest, May 2015-99, July 2015 -188, and December 2015 -93, which makes the total open interest increase much more impressive (bullish).

October 22 was the 2nd day in a row in which prices advanced along with open interest.This is bullish, especially because managed money remains heavily net short Chicago wheat. As this report is being compiled on October 23, December Chicago wheat is trading 4.25 cents higher and has made a new high for the move at 5.30 3/4. We much prefer the fundamentals of Kansas City wheat to Chicago, but Kansas City wheat has been disappointing for the past couple of days. On October 17, December Chicago wheat generated a short-term buy signal, but remains on an intermediate term sell signal.We have no recommended position in Chicago wheat.

Kansas City wheat: Liquidate the long December 2014-short May 2015 futures spread.

December Kansas City wheat advanced 3.00 cents on volume of 18,942 contracts. Total open interest increased by a massive 2,401 contracts, which relative to volume is approximately 425% above average meaning that large numbers of longs were entering the market and driving prices higher, however this was met by massive numbers of short sellers on the other side of the trade, which kept a lid on prices.There were open interest increases across the board. Additionally the December 2014-May 2015 futures spread widened by 0.50 cent.

As this report is being compiled on October 23, December Kansas City wheat is trading 3.25 cents lower while the Chicago contract is simultaneously trading 2.25 cents higher. On October 17, December Kansas City wheat generated a short-term buy signal, but remains on an intermediate term sell signal. 

The USDA reported all wheat sales of just 299.4 thousand metric tons bringing total commitments to 539.9 million bushels versus USDA projections for the season of 925 million bushels. The most recent sale is the lowest of the past several weeks and is a major disappointment.

WTI crude oil:

December WTI crude oil lost $1.97 on surprisingly light volume of 647,036 contracts. Total open interest declined only 6,133 contracts, which relative to volume is approximately 50% below average. The November contract lost 250 of open interest, December 2014 -863, January 2015 -3,180.Yesterday, the market made a low of 80.22 which is above the contract low of 79.10 made on October 16. As this report is being compiled on October 23, December WTI is trading $1.04 for higher after making a low at 80.05. Stand aside.

Natural gas:

November natural gas lost 5.2 cents on volume of 209,698 contracts. Total open interest declined by 3,740 contracts, which relative to volume is approximately 25% less than average. The November contract accounted for loss of 8,382 of open interest. As this report is being compiled after the release of the EIA storage report, November natural gas is trading 6.1 cents lower and has made a new contract low of 3.590. On October 10, November and December natural gas generated a short-term sell signal and remains on an intermediate term sell signal. Stand aside

The Energy Information Administration announced that working gas in storage was 3,393 Bcf as of Friday, October 17, 2014, according to EIA estimates. This represents a net increase of 94 Bcf from the previous week. Stocks were 336 Bcf less than last year at this time and 338 Bcf below the 5-year average of 3,731 Bcf. In the East Region, stocks were 142 Bcf below the 5-year average following net injections of 47 Bcf. Stocks in the Producing Region were 161 Bcf below the 5-year average of 1,200 Bcf after a net injection of 39 Bcf. Stocks in the West Region were 36 Bcf below the 5-year average after a net addition of 8 Bcf. At 3,393 Bcf, total working gas is below the 5-year historical range.

Gold:

December gold lost $6.20 on volume of 123,886 contracts. Total open interest declined by 1632 contracts, which relative to volume is approximately 45% less than average. The decline of open interest on a price decline is healthy, especially since there were open interest increases on price advances. As this report is being compiled on October 23, December gold is trading 16.60 lower and has made a daily low of 1226.30, which is the lowest print since October 15 when December gold made a low of 1222.00, but closed $10.50 higher on the day on heavy volume of 272,753 contracts.

On October 21, December gold generated a short-term buy signal, and as is usually the case after the generation of a buy signal, the market tends to pullback from 1-3 days, and this is the opportunity to enter bullish positions.We have voiced our concern that gold’s sister metals: platinum and silver remain on short and intermediate term sell signals, and are not close to generating short-term buy signals. This diminishes our enthusiasm for the long side of gold. In order for December gold to reverse the short-term buy signal, the high of the day must be below OIA’s key pivot point for October 23 of 1223.40.The low for October 23 has been 1226.30, and it would be constructive if the October 15 low of 1222.00 holds.We have no recommended position in gold.

Yen: It appears highly likely that the December yen will reverse the short-term buy signal generated on October 14 in the next day or two.

Cocoa:

December cocoa advanced $3.00 on very light volume of 9,695 contracts. Total open interest increased by 458 contracts, which relative to volume is approximately 75% above average meaning that a battle ensued between longs and shorts, and the market moved only fractionally higher by the close. The December contract lost 345 of open interest, which makes the total open interest increase more impressive (bullish). However, the massive increase of open interest should have moved prices much higher, and attribute the minor price increase to aggressive short selling.

Yesterday, the March 2015-December 2015 futures spread widened by $5.00. As this report is being compiled on October 23, December cocoa has closed at 3,120, up $7.00. December cocoa remains on a short and intermediate term sell signal, and there is a risk the market will drift lower. However, until the Ebola crisis diminishes, prices should remain firm.Continue to hold the bull spread: long March 2015-short December 2015 and the long call in the March contract.

Coffee: On October 23, December coffee will generate a short-term sell signal, but remains on an intermediate term buy signal.

December coffee lost 8.50 cents on surprisingly light volume of 18,762 contracts. Volume declined dramatically from October 21 when December coffee advanced 20 ticks after making a low of 1.9180 and then rallying to a nearly unchanged by the close. On October 22, total open interest declined by a hefty 1,255 contracts, which relative to volume is approximately 160% above average meaning that liquidation was heavy on the decline. The December contract accounted for loss of 2,283 of open interest. The bull spread: long July 2015-short March 2016 future spread narrowed by 90 points. Yesterday, was the 1st indication that liquidation has begun in earnest.As this report is being compiled on October 23, December coffee is closed at 1.9330, up 2.20 cents. Maintain the July 2015-March 2016 bull spread.