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Soybeans:

January soybeans advanced 34.00 cents on heavy volume of 457,314 contracts. Volume declined from October 28 when January soybeans advanced 2.25 cents on volume of 486,314 contracts and total open interest declined by 14,651 contracts. On October 29, open interest declined again, this time by 8,536, which relative to volume is approximately 25% below average, but an open interest decline on a strong price advance is clearly bearish. The November contract accounted for loss of 23,190 of open interest and there were insufficient increases of open interest in the forward months to offset the decline in the November contract.This also is quite bearish.

If we take the stats from October 27, 28 and 29, January soybeans have advanced 65.75 cents yet total open interest has declined by 30,836. Despite very favorable price action, market participants are liquidating as prices move higher. This is bearish. The pattern of liquidation on higher prices has been consistent, which in our view confirms the likelihood of soybeans turning down again.

On October 24, January soybeans generated a short-term buy signal, but has been unable to generate an intermediate term buy signal. In order for this to occur, the low for the day in the January contract must be above OIA’s key pivot point for October 30 of 10.45 7/8. Thus far today, the daily low has been above OIA’s key pivot point of 10.16, which is constructive. However, the market remains massively overbought and is vulnerable to a sharp correction. As this report is being compiled on October 30, January soybeans are trading 12.25 cents lower after making a new high for the move at 10.59 1/4.

The move higher is being caused by low inventory and the pipeline hasn’t been filled with beans from the current harvest.In order for prices to move higher, new buyers must be willing to step up and pay ever higher prices for soybeans, and we think it is going to be hard to find new buyers willing to pay prices above current levels.The USDA reported soybean sales of 1326.04 thousand metric tons, which is the 4th highest number for the season which began on September 1.This brings total commitments to an astounding 1.2529 billion bushels versus USDA projections for the season of 1.700 billion.This is the best start of the season since 2008- 2009. Remarkably, 74% of the 2014-2015 crop has been committed. We have no recommendation. 

Soybean meal:

December soybean meal advanced $22.10 on heavy volume of 161,233 contracts. Volume fell from October 28 when December soybean meal lost 1.70 on volume of 197,552 contracts and total open interest declined by 711 contracts. On October 29, total open interest increased by 4,781 contracts, which relative to volume is approximately 20% above average meaning that new longs were entering the market at a more aggressive pace and driving prices to a new high for the move of 404.60.There were open interest increases in the December 2014 through October 2015 contracts. As this report is being compiled on October 30, December soybean meal is trading $10.40 lower after making a new high for the move of 408.50, which is the highest print since May 27, 2014 (408.40).We view soybean meal as an extreme example of a blow off in the making. The demand for meal has been the catalyst for the move higher in the soybean complex, and once the pipeline is filled, we see prices falling sharply.

In yesterday’s report, we mentioned that total open interest from October 1 through October 27 increased only 8,033 contracts, or somewhat more than 2%.Furthermore, we pointed out the abysmal open interest increase reflected potential market participants who have remained on the sidelines during the rally.The open interest increase of 4,781 on October 29 is the largest since October 16 when December soybean meal generated a short-term buy signal. In other words, new participants are flocking into the market just as it is making major new multi-month highs. This increases the likelihood that soybean meal is near a major top.

The USDA reported that sales of soybean meal for the recent week totaled 147.84 thousand metric tons, which brings total commitments to 6393.29 thousand metric tons versus USDA projections for the season of 12,000 thousand metric tons. This is the best start of the season since 2009-2010.

Soybean oil: December soybean oil will generate a short-term buy signal on October 30.

December soybean oil advanced 1.39 cents on heavy volume of 167,077 contracts.Volume was the strongest since February 13 when 190,825 contracts were traded and December soybean oil closed at 39.38. Additionally, it should be noted that volume in soybean oil exceeded that of soybean meal (161,233). Most remarkable, was the massive increase of open interest of 8,144 contracts, which relative to volume is approximately 95% above average meaning that aggressive new longs were entering the market in heavy numbers and driving prices to a new high for the move (34.28), which is the highest print since August 14 (34.33). Also, note that total open interest of soybean oil massively exceeded soybean meal’s

Making the total open interest increase more impressive was the fact that the December contract lost 4,259 of open interest. We were surprised that open interest didn’t decline: According to the latest COT report, managed money is long soybean oil by a ratio of 1.03:1. In summary there are large numbers of speculative shorts who not been blown out of the market, and this class trader will provide fuel for a continued rally.In order for December soybean oil to generate an intermediate term buy signal, the low the day must be above OIA’s key pivot point for October 30 of 34.80.

The pace of exports is unimpressive and according to this week’s report by the USDA only 15.85 thousand metric tons were sold, which brings total commitments to 238 thousand metric tons versus USDA projections for the entire season which ends on September 30 of 2100 thousand metric tons. However, palm oil has been the leader, and is trading 16.42% above the low made on September 2.We have no recommendation for soybean oil.

Corn: December corn will generate an intermediate term buy signal on October 30 because the low for the day is above OIA’s key pivot point of 3.65 3/4

December corn advanced 10.75 cents on heavy volume of 381,450 contracts.Volume was the strongest since August 12 when 561,340 contracts were traded and December corn closed at 3.69. On October 29, total open interest increased by 4,886 contracts, which relative to volume is approximately 45% less than average. The December contract accounted for loss of 9,817 of open interest, which makes the total open interest increase more impressive (bullish). The March 2015 through December 2016 contracts all gained open interest.Yesterday, December corn made a new high for the move at 3.76, and as this report is being compiled on October 30 has made another new high at 3.81, which is the highest print since August 18 (3.81).

The USDA reported sales of 498.8 thousand metric tons, which brings total commitments to 737.9 million bushels versus USDA projections for the season, which ends on August 31, 2015 of 1.750 billion bushels. The current sale is the lowest of the season, which began on September 1. However, this is the best start of the season since 2008-2009. We have no recommendation.

Chicago wheat:

December Chicago wheat lost 7.50 cents on volume of 78,424 contracts. Total open interest declined by 1,384 contracts, which relative to volume is approximately 30% below average. The December contract accounted for loss of 4,259 of open interest. The decrease of total open interest on yesterday’s decline is constructive.As this report is being compiled on October 30, December Chicago wheat is trading 3.00 cents higher and has made a new high for the move at 5.45 1/2, which is the highest print since 5.56 1/2 made on September 3. Additionally, the low on October 30 has been 5.32 1/2, which is below OIA’s key pivot point for an intermediate term buy signal, but above the pivot point of 5.29, which increases the likelihood of the rally continuing.

The USDA reported sales of 444.9 thousand metric tons for wheat in all categories bringing total commitments to 556.2 million bushels versus USDA projections for the season, which ends on May 31, 2015 of 925 million bushels. This week’s sale was not very large, but it is above the average weekly requirement to reach the USDA projection.

WTI crude oil:

December WTI crude oil advanced 78 cents on volume of 541,260 contracts. Volume was the strongest since October 23 when December WTI advanced $1.57 on volume of 634,598 contracts and total open interest increased by 527 contracts. On October 29, total open interest increased by 6,003 contracts, which relative to volume is approximately 45% below average. The December contract accounted for loss of 4,308 of open interest, which makes the total open interest increase somewhat more positive. As this report is being compiled on October 30, December WTI is trading 86 cents lower and has made a daily low of 80.80, which is the lowest print since 80.36 made on October 28. Yesterday, we said the market could rally for a day or two, but apparently it is weak to the extent it cannot sustain a rally for more than just a day. We have no recommendation.

Natural gas:

December natural gas advanced 5.7 cents on volume of 314,489 contracts.Total open interest increased by 786 contracts, which is minuscule and dramatically below average. The November contract accounted for loss of 6,499 of open interest. As this report is being compiled after the release of the EIA storage report, December natural gas is trading 3.1 cents higher, but has not taken out yesterday’s high of 3.849. December natural gas remains on a short and intermediate term sell signal. Stand aside.

The Energy Information Administration announced that working gas in storage was 3,480 Bcf as of Friday, October 24, 2014, according to EIA estimates. This represents a net increase of 87 Bcf from the previous week. Stocks were 294 Bcf less than last year at this time and 310 Bcf below the 5-year average of 3,790 Bcf. In the East Region, stocks were 130 Bcf below the 5-year average following net injections of 41 Bcf. Stocks in the Producing Region were 146 Bcf below the 5-year average of 1,223 Bcf after a net injection of 38 Bcf. Stocks in the West Region were 34 Bcf below the 5-year average after a net addition of 8 Bcf. At 3,480 Bcf, total working gas is below the 5-year historical range.

Gold: December gold will generate a short-term sell signal on October 30, which will reverse the short-term buy signal generated on October 21.

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

December copper advanced 1.15 cents on volume of 55,174 contracts. Total open interest increased by just 24 contracts. As this report is being compiled on October 30,December copper has closed 4.20 cents lower. We have no recommendation.

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

December cotton advanced 88 points on heavy volume of 34,433 contracts.Volume was the strongest since September 10 when December cotton advanced 1.35 cents on volume of 34,978 contracts and closed at 67.14. On October 29, total open interest increased by a massive 2,749 contracts, which relative to volume is approximately 215% above average meaning that aggressive new longs were entering the market in heavy numbers and driving prices to a new high for the move (65.99), which is the highest print since 66.20 made on September 17.For December cotton to continue its advance, it must make a daily low above OIA’s key pivot point for October 30 of 65.72, and will generate an intermediate term buy signal if the low the day is above OIA’s key pivot point for October 30 of 66.73. Due to burdensome stock levels globally, and weak demand, we cannot recommend bullish positions.

Coffee:

December coffee lost 2.75 cents on volume of 21,709 contracts. Total open interest declined by 412 contracts, which relative to volume is approximately 25% below average. The December contract accounted for loss of 3,727 of open interest. Yesterday, the July 2015-March 2016 spread lost 15 points. 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 30 of 1.8870. December coffee generated a short-term sell signal on October 23 and thus far has shown enough strength not to generate an intermediate term sell signal. However, as this report is being compiled on October 30, December coffee has closed at a new low of 1.8760, down 1.00 cent.This is the lowest close since 1.8605 made on September 26. Maintain the long July 2015-short March 2016 coffee futures spread and exit the position upon penetration of the July 22 low of 3.10 cents premium to March 2016.