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Soybeans:

January soybeans advanced 29.50 cents on heavy volume of 404,008 contracts. Volume was only slightly above October 24 when January soybeans lost 16.75 cents on volume of 400,880 contracts and total open interest declined by 72,657 contracts. Additionally, volume was only slightly above that of October 23 when January soybeans advanced 30.25 cents on volume of 398,611 contracts and total open interest increased by 3454 contracts.

On October 27, total open interest declined by 7,649 contracts, which relative to volume is approximately 25 percent below average, however an open interest decline on an advance to a new high for the move is bearish. The November contract accounted for loss of 35,576 of open interest and there were insufficient open interest increases in the forward months to bring total open interest to a positive number.

Although the imminent 1st notice day in the November contract is having a major impact on total open interest, the fact remains we are seeing a pattern of open interest declines on advances, or at best, minor open interest increases. On October 21, January soybeans advanced 19.50 on volume of 339,471 contracts and yet total open interest declined by 8,518 contracts. Taking the stats from trading on October 27, 23 and 21, January soybeans advanced 79.25 cents, but total open interest declined by 12,713 contracts.On October 24, January soybeans generated a short-term buy signal, but remains on an intermediate term sell signal. As this report is being compiled on October 28, January soybeans are trading 4.50 cents higher after having made a new high for the move at 10.41, which is the highest print since September 2 (10.45 1/2).

Usually, after the generation of a short-term buy signal, the market has a tendency to pullback from 1-3 days. In this case, the only pullback that occurred was in the evening session on Sunday when January soybeans made a low of 9.73 1/4.We strongly advise against chasing the advance, because we think it is a rally in a bear market. In essence, the market is doing to short sellers what it just did to longs during the past several weeks.

In yesterday’s report, we stated: 

“In order for the rally to continue, January soybeans must make a low for the day above OIA’s key pivot point for October 27 of 9.95 1/2. The next area of resistance is OIA’s key pivot point for October 27 of 10.15 1/8, and January soybeans must make a daily low above it. In order for an intermediate term buy signal to be generated, the low the day must be above OIA’s key pivot point for October 27 of 10.45 7/8.”

Depending upon the open interest stats for October 28, today’s high may represent the high of the move, and we do not think there are going to be enough new buyers at the high-end of the trading range to enable January soybeans to generate an intermediate term buy signal. At this juncture, stand aside.

Soybean meal:

December soybean meal advanced $26.60 on volume of 140,606 contracts. Volume was the strongest since October 22 when December soybean meal lost $4.90 on volume of 164,795 contracts and total open interest declined by 5,023 contracts. On October 27, total open interest increased by 4,374 contracts, which relative to volume is approximately 20% above average. The May 2015 contract lost 508 of open interest. Considering the magnitude of the advance, volume and open interest was disappointing. December soybean meal made a new high for the move at 377.50, which is the highest print since June 30, 2014 (397.90). As this report is being compiled on October 28, December soybean meal is trading 10 cents higher after making a new high for the move at 399.80, which is the highest print since 402.00 made on June 23. December soybean meal generated a short-term buy signal on October 16 and an intermediate term buy signal on October 24.The move in soybean meal has all the markings of a blow off top. We recommend a stand aside posture.

Corn:

December corn advanced 10.00 cents on disappointing volume of 249,545 contracts. Volume shrank from October 24 when December corn lost 6.75 cents on volume of 252,099 contracts and total open interest declined by 8,357 contracts. On October 23, December corn advanced 6.75 cents on disappointing volume of 229,210 contracts and total open interest declined by 2,556 contracts. On October 27, total open interest declined by 7,162 contracts, which relative to volume is average, but an open interest decline on an advance of the magnitude seen on October 27 is bearish. The December contract accounted for loss of 11,663 of open interest, May 2015-684, which means there were insufficient open interest increases in the forward months to offset the decline in the December and May contracts. The two most recent advances (October 23 and 27) have both had open interest declines on unimpressive volume.On October 9, December corn generated a short-term buy signal, but remains on an intermediate term sell signal. As this report is being compiled on October 28, December corn is made a high of 3.71 3/4, which is the highest print since August 22 (3.73 3/4). Stand aside.

From the October 24 report:

“In order for the rally to continue, December corn must make a low above OIA’s key pivot point for October 27 of 3.58 1/8 and an intermediate term buy signal will be generated if the daily low is above OIA’s key pivot point for October 27 of 3.65 3/8.”

Chicago wheat:

December Chicago wheat advanced 5.00 cents on volume of 80,963 contracts. Volume shrank from October 24 when December Chicago wheat lost 9.00 cents on volume of 89,146 contracts and total open interest increased by 1,202 contracts. On October 27, total open interest increased by 1,893 contracts, which relative to volume is approximately 10% below average, but an open interest increase on the price advance is positive, especially since the December 2014 contract lost 2,205 of open interest and managed money is heavily net short according to the most recent COT report. As this report is being compiled on October 28, December Chicago wheat is trading 7.75 cents higher and has made a daily high of 5.33, which is below the October 24 high of 5.39 1/4.On October 17, December Chicago wheat generated a short-term buy signal, but remains on an intermediate term sell signal.

In order for December Chicago wheat to continue its advance, it must make a low above OIA’s key pivot point for October 28 of 5.28 7/8. If it is unable to do so, this may be the extent of the rally, at least for now. For December Chicago wheat to generate an intermediate term buy signal, the low the day must be above OIA’s key pivot point for October 28 of 5.43 5/8.

WTI crude oil:

December WTI crude oil lost 1 cent on light volume of 471,933 contracts. Volume declined from October 24 when December WTI lost $1.08 on volume of 492,554 contracts and total open interest increased by 10,533 contracts. On October 27, total open interest increased by 9,652 contracts, which relative to volume is approximately 20% below average, however this is the 2nd open interest increase in a row when prices have declined.The December contract accounted for loss of 1,052 of open interest. As this report is being compiled on October 28, December WTI crude oil is trading 2 cents below yesterday’s close and has made a daily low of 80.36, which is almost the dollar above yesterday’s low of 79.44. Stand aside.

Natural gas:

December natural gas lost 6.1 cents on volume of 213,527 contracts. Total open interest increased by 2,928 contracts, which relative to volume is approximately 45% less than average.The November contract accounted for loss of 5,364 of open interest.As this report is being compiled on October 28, December natural gas is trading 9.6 cents higher and has made a daily high of 3.746, which is the highest print since October 23 (3.766).December natural gas generated a short-term sell signal on October 10 remains on an intermediate term sell signal. Stand aside.

Gold:

December gold lost all $2.50 on light volume of 96,463 contracts. Total open interest increased by 3406 contracts, which relative to volume is approximately 40% above average. As this report is being compiled on October 28, December gold has made a low of 1222.20, which is slightly above the low made on October 15 of 1222.00. Gold performance continues to be lackluster along with the rest of the precious metals. December gold remains on a short-term buy signal, but an intermediate term sell signal. Stand aside.

Cocoa: This will be our last report on cocoa until we see a trading opportunity or change of signal. On October 2, December cocoa generated a short and intermediate term sell signal.

December cocoa lost $80.00 on very heavy volume of 42,913 contracts.Volume was the highest since 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 27, total open interest declined by 2,277 contracts, which relative to volume is approximately 110% above average meaning that liquidation was extremely heavy as December cocoa declined to the lowest level since May 2014. The December contract lost 3,828 of open interest, March 2015 -893. Yesterday, the March 2015-December 2015 cocoa spread closed at 43.00 premium to March 2015, which means that clients should be out of the spread and on the sidelines. As this report is being compiled on October 28, December cocoa has fallen again, this time by 47.00. Stand aside.

Coffee:

December coffee lost 60 ticks on volume of 21,853 contracts. Volume was the lowest since October 22 when December coffee lost 8.50 cents on surprisingly light volume of 18,762 contracts and total open interest declined by 1255 contracts. On October 27, total open interest declined just 54 contracts. The December contract accounted for loss of 2253 of open interest. Yesterday, December coffee made a new low for the move of 1.8800, and as this report is being compiled on October 28 has not taken out yesterday’s low.Yesterday, the July 2015-March 2016 spread widened by 35 ticks. We recommend holding the spread until the July 22 low of 3.10 premium to March 2016 is penetrated.December coffee generated a short-term sell signal on October 23, but remains on an intermediate term buy signal.In order for December coffee to generate an intermediate term sell signal, the high of the day must be below OIA’s key pivot point for October 28 of 1.8870.

S&P 500 E mini: On October 27, the December S&P 500 E mini generated an intermediate term buy signal, and it appears highly likely that a short-term buy signal will be generated on October 28.

The S&P 500 E mini lost 2.75 points on volume of 1,459,135 contracts. Total open interest increased by 8580 contracts, which relative to volume is approximately 65% less than average. As this report is being compiled on October 28, the December E mini is trading 11.50 points higher and has made a daily low of 1956.75, which is above OIA’s key pivot point for October 28 of 1952.70. Stand aside.

From the October 26 Weekend Wrap:

“The S&P 500 cash index is at a crucial point. On Friday, it closed at 1964.58, which is a bit more than 2 points away from its 50 day moving average of 1966.94. Additionally, for the S&P 500 to generate a short-term buy signal the low of the day must be above OIA’s key pivot point for October 24 of 1951.40. For an intermediate term buy signal to be generated the low the day must be above OIA’s key pivot point for October 24 of 1944.10. As we have reported previously, the open interest action relative to the price advance, which began on October 16 has been abysmal.”