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Soybeans:

January soybeans advanced 2.25 cents on huge volume of 486,314 contracts.Volume was the highest of 2014 and took out the previous high of 427,926 contracts traded on February 27 when January soybeans closed at 11.58  3/4. On October 28, total open interest declined by 14,651 contracts, which relative to volume is approximately 20% above average meaning that liquidation was substantial on the modest advance. The November contract accounted for loss of 31,473 of open interest as it approaches 1st notice day and March 2015, July 20 15th and September 2015 contracts lost a total of 2,070 of open interest.

Yesterday, January soybeans made a high of 10.41, and this has been taken out on October 29 (10.51). As we pointed out in yesterday’s report, the open interest action relative to the price advance has been bearish, and the market has successfully blown out short sellers, but it is apparent that new shorts and longs have been unwilling to make commitments as prices move higher.

On October 28, January soybeans made a low of 10.06 1/2, which was above OIA’s key pivot point of 9.95 1/2, but has been unable to make a low above the next pivot point for October 29 of 10.16. On October 24, January soybeans generated a short-term buy signal, but remains on an intermediate term sell signal. 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 29 of 10.45 7/8.

We are skeptical of the market’s ability to generate the intermediate term buy signal. Also, since generating the short-term buy signal on October 24, soybeans have not had a correction lasting at least one day. During the evening session on Sunday, soybeans made an intraday low to 9.73 1/4. The market remains significantly overbought relative to its 50 day moving average, and we recommend a stand aside posture.

From the October 27 report:

“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.”

Soybean meal:

December soybean meal lost $1.70 on huge volume of 197,552 contracts.Volume traded on October 28 was the highest of 2014. On October 28, total open interest declined by 711 contracts, which is 85% below average, but a decline is negative considering that December soybean meal made a high of 399.80, and sold off to close only moderately lower. Yesterday’s high nearly touched the high made on June 23 of 402.00.

As this report is being compiled on October 29, December soybean meal is trading $22.70 higher and has made a daily high of 404.60, which is above yesterday’s high. As we said in yesterday’s report, the massive rally from the October 1 low of 295.10 has look and feel of a blow off top.

From October 1 through October 28, December soybean meal has advanced 25.62% while January soybeans have advanced only 9.73%. This disparity indicates that there is a major scramble to fill temporary soybean meal demand, and as harvest progresses, there will be plenty of soybeans to fill the pipeline for crushing.

In short, we see this massive rally as temporary. Another major sign the rally does not have legs is that total open interest from October 1 through October 27 increased only 8,033 contracts, or a bit more than 2%. This clearly indicates that new commitments made during the rally have been sparse and that much of the action since October 1 has been due to liquidation by shorts and longs. In summary, large numbers of potential market participants have been on the sidelines during the rally.

On October 16, December soybean meal generated a short-term buy signal and an intermediate term buy signal on October 24.We have no recommendation.

Soybean oil: December soybean oil will generate a short term buy signal if the low for the day is above OIA’s key pivot point for October 29 of 32.97.

Corn:

December corn advanced 1.50 on heavy volume of 357,398 contracts. Volume was the strongest since October 10 when 349,869 contracts were traded and December corn closed at 3.34. On October 28, total open interest declined by 3,310 contracts, which relative to volume is approximately 50% below average. The December contract accounted for loss of 10,027 of open interest and July and September 2015 contracts lost 601 of open interest.For the past 5 days beginning on October 22, total open interest has declined every day, whether prices rise or fall. We consider this to be bearish and signals that market participants are liquidating even though prices are advancing.

As this report is being compiled on October 29, December corn is trading 10.50 cents higher And has made a new high of 3.76, which takes out yesterday’s high of 3.71 3/4. This is the highest print since 3.73 3/4 made on August 22.Yesterday, December corn made a low above OIA’s key pivot point of 3.58 1/8, meaning that the rally would continue to the next point of resistance which is the price for the intermediate term buy signal of 3.65 3/8. The daily low must be above this pivot point. On October 9, December corn generated a short-term buy signal.We have no recommendation.

Chicago wheat:

December Chicago wheat advanced 8.00 cents on volume of 71,609 contracts. Volume declined from October 27 when December Chicago wheat advanced 5.00 cents on volume of 80,963 contracts and total open interest increased by 1,893 contracts. On October 28, total open interest declined by 125 contracts. The December contract accounted for loss of 2,700 of open interest, May 2015-373, which makes the minor decline of total open a bit more impressive. In short, there was sufficient buying in the forward months to offset most of the decline in December 2014 and May 2015 contracts.

As this report is being compiled on October 29, December Chicago wheat is trading 7.25 cents higher and has made a daily high of 5.40 1/2 which takes out the previous high print for the move of 5.39 1/4 made on October 24.December Chicago wheat has been unable to make a low above OIA’s key pivot point of 5.29, and must do so if the rally is to continue. In order 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 29 of 5.43 5/8.We have no recommendation.

WTI crude oil:

December WTI crude oil advanced 42 cents on light volume of 393,356 contracts. Total open interest increased by 1,729 contracts, which relative to volume is approximately 80% less than average. The December contract accounted for loss of 2,499 of open interest. As this report is being compiled on October 29, December WTI crude oil is trading $1.01 higher and has made a high of 82.88, which is the highest print since 83.15 made on October 22.It appears likely that December WTI has made a temporary low, and that a rally could ensue for the next day or two. On October 16, December WTI made its contract low at 79.10 and attempted to test this on October 27 with a low of 79.44. December WTI remains on a short and intermediate term sell signal. Stand aside.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.1 million barrels from the previous week. At 379.7 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 1.2 million barrels last week, and are in the lower half of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 5.3 million barrels last week and are near the lower limit of the average range for this time of year. Propane/propylene inventories fell 1.3 million barrels last week but are well above the upper limit of the average range. Total commercial petroleum inventories decreased by 8.5 million barrels last week.

Natural gas:

December natural gas advanced 9.4 cents on heavier than normal volume of 311,425 contracts. Volume was the strongest since October 23 when December natural gas lost 3.7  cents on volume of 339,468 contracts and total open interest declined by 12,047 contracts. On October 28, total open interest declined by 9,512 contracts, which relative to volume is approximately 20% above average. The December contract lost 1,594 of open interest and November -12,850. As this report is being compiled on October 29, December natural gas is trading 8.8 cents higher and has made a daily high of 3.849, which is the highest print since 3.900 made on October 17.December natural gas remains on a short and intermediate term sell signal.

Gold: December gold will generate a short-term sell signal, if the high of the day is below OIA’s key pivot point for October 29 of 1223.50. On October 21, December gold generated a short-term buy signal, but it remains on an intermediate term sell signal. Stand aside.

Copper: On October 29, December copper will generate a short-term buy signal, but remains on an intermediate term sell signal.

December copper advanced 2.90 cents on volume of 50,776 contracts. Total open interest declined by a massive 6477 contracts, which relative to volume is approximately 410% above average meaning that liquidation was extremely heavy on the advance.As this report is being compiled, December copper has made a new high for the move at 3.1140, which is the highest print since 3.1405 made on September 18. Stand aside.

Cotton: On October 29, December cotton will generate a short-term buy signal, but will remain on an intermediate term sell signal.

December cotton advanced 80 points on volume of 17,254 contracts. Total open interest increased by a massive 1,478 contracts, which relative to volume is approximately 270% above average, meaning that aggressive new longs were entering the market and driving prices higher (64.50). As this report is being compiled on October 29, December cotton is trading 1.11 cents higher on the day. It seems that all commodity markets are in a rally mode and this is taking cotton higher with it. However, cotton fundamentals are terrible and we see this is a rally in a bear market. Stand aside.

Coffee:

December coffee advanced 1.45 cents on volume of 21,638 contracts. Total open interest declined by a massive 1,459 contracts, which relative to volume is approximately 160% above average meaning that liquidation was very heavy on the modest advance. There remains large numbers of speculative longs in the market, and in previous reports we stated that rallies would be met by liquidation. On October 23, December coffee generated a short-term sell signal, but remains on an intermediate term buy signal. As this report is being compiled on October 29, December coffee is closed at 1.8960, down 2.75 cents. Yesterday, the July 2015-March 2016 spread lost 5 points. Stay with the spread and exit upon penetration of the July 22 low of 3.10 cents premium to March 2016.

S&P 500 E mini: On October 28, the December S&P 500 E mini generated a short-term buy signal after generating an intermediate term buy signal on October 27.

The December S&P 500 E mini advanced 23.00 points on volume of 1,576,874 contracts. Total open interest increased by 26,520 contracts, which relative to volume is approximately 35% less than average.As this report is being compiled after the release of the Federal Reserve minutes, the December E mini is trading 14.25 points lower. We recommend a stand aside posture..