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On October 31, the dollar index is sharply higher, which is negatively affecting many commodities.

Soybeans:

January soybeans lost 19.25 cents on volume of 346,523 contracts. Volume was the lowest since October 21 when January soybeans advanced 19.50 cents on volume of 339,471 contracts and total open interest declined by 8,518 contracts. On October 30, total open interest declined by a massive 23,497 contracts, which relative to volume is approximately 160% above average meaning that liquidation was extremely heavy on the decline. The November contract accounted for loss of 17,615 of open interest, while the January 2015 and March 2015 contracts lost a total of 9409.

Yesterday, January soybeans made a new high for the move at 10.59 1/4, which is the highest print since August 20 (10.62 3/4).As we have pointed out during the past several sessions, total open interest declines whether the market advances or pulls back. Furthermore, the January contract is unable to make a low above OIA’s key pivot point for an intermediate term buy signal, which on October 31 is 10.46 1/8. We want to take a look at the COT report and may consider recommending shorting out of the money calls in the January contract. We think the advance in soybeans has been a rally in a bear market. For now, stand aside.

Soybean meal:

December soybean meal lost $17.20 on heavy volume of 138,052 contracts. However, volume was the lowest since October 24 when December soybean meal lost 2.20 on volume of 109,593 contracts and total open interest declined by 3,273 contracts. On October 30, total open interest increased just 395 contracts, which is minuscule and dramatically below average. The December contract accounted for loss of 4,217 of open interest, January 2015 -195, which makes the minor total open interest increase potentially bearish.

Yesterday, December soybean meal made a high of 408.50, which is the highest print since May 27, 2014 (408.40). As this report is being compiled on October 31, December soybean meal is trading 5.40 higher while the January 2015 contract is +1.50 on the day. In short, the spread continues to widen, which is bullish for soybean meal. As we have said before, we see the move in soybean meal as a blow off due to a very low pipeline of supplies coupled with solid demand. However this condition will be remedied as large quantities of soybeans move to crushing facilities. On October 16, December soybean meal generated a short-term buy signal and on October 24 generated an intermediate term buy signal. We recommend a stand aside posture.

Soybean oil: On October 30, December soybean oil generated a short-term buy signal, but remains on an intermediate term sell signal.

December soybean oil advanced 13 points on volume of 121,750 contracts. Although December soybean oil advanced to a new high for the move (34.59), volume fell dramatically from October 29 when December soybean oil advanced 1.39 cents on volume of 167,077 contracts and total open interest increased by a massive 8,144 contracts. On October 30, total open interest declined just 160 contracts, which is minuscule and dramatically below average. The December contract lost 4,584 of open interest, which makes the minor decline of open interest a positive development.

As this report is being compiled on October 31, December soybean oil is trading 32 points higher and has made a new high of 34.95..Although the fundamentals for the US soybean oil market are not terribly compelling, palm oil is the leader and this should support soybean oil on setbacks.Now that soybean oil is on a short-term buy signal, the market should pullback from 1-3 days and this is the opportunity to enter bullish positions. However, we suggest waiting until December soybean oil has generated an intermediate term buy signal before considering bullish positions.Also, we want to see how soybean oil trades on setbacks in the soybean in soybean meal markets. In order to generate an intermediate term buy signal, the low the day in the December contract must be above OIA’s key pivot point for October 31 of 34.80.

Corn: On October 30, December corn generated an intermediate term buy signal, after generating a short-term buy signal on October 9.

December corn lost 1.50 cents on volume of 353,829 contracts. Volume was the lowest since October 27 when December corn advanced 10.00 cents on volume of 249,545 contracts and total open interest declined by 7,162 contracts. On October 30, total open interest increased 2,622 contracts, which relative to volume is approximately 60% below average. However, the December contract lost 10,920 of open interest and there were open interest increases in the March 2015 through December 2016 contracts. In short, the open interest increase though not a robust, is positive, especially since December corn made a new high for the move at 3.81, which is the highest print since August 18 (3.81). As this report is being compiled on October 31, December corn is trading 3.75 cents lower and has made a daily high of 3.78. We think it is possible for corn to rally to OIA’s key pivot point of 3.93 7/8, but in our view corn will struggle beyond this point.We have no recommendation.

Chicago wheat:

December Chicago wheat lost 2.25 cents on heavy volume of 91,340 contracts.Volume was the strongest since October 10 when 112,735 contracts were traded and December Chicago wheat advanced 5.25 cents and total open interest increased by 51 contracts. On October 30, total open interest declined by 2,635 contracts, which relative to volume is average.The December contract accounted for loss of 6,711 of open interest. Yesterday, December wheat made a high of 5.45 1/2, which is the highest print since 5.56 1/2 made on September 3.

As this report is being compiled on October 31, December Chicago wheat is trading 9.75 cents lower.If December Chicago wheat is unable to generate an intermediate term buy signal, it may be a candidate for bearish positions because wheat fundamentals are dismal. US exports have been disappointing. In order for December Chicago wheat to generate an intermediate term buy signal, the low the day in the December contract must be above OIA’s key pivot point for October 31 of 5.43 1/2. If December Chicago wheat is unable to generate an intermediate term buy signal, the market will likely rollover to the downside.December Chicago wheat generated a short-term buy signal on October 17.

WTI crude oil:

December WTI crude oil lost $1.08 on surprisingly light volume of 461,960 contracts. Volume fell substantially from October 29 when December WTI advanced 78 cents on volume of 541,260 contracts and total open interest increased by 6,003 contracts. On October 30, total open interest declined just 239 contracts. The December contract accounted for loss of 781 of open interest, January 2015 -546. As this report is being compiled on October 31, December WTI is trading 69 cents lower and has made a daily low of 79.55, which is above the low of 79.44 made on October 27 and the October 16 contract low of 79.10. We think it is inevitable that the December WTI will make a new contract low, and recommend that clients stand aside.

Natural gas:

December natural gas advanced 3.9 cents on light volume of 195,546 contracts.Volume was the weakest since September 10 when 195,538 contracts were traded and December natural gas closed at 4.086. On October 30, total open interest increased by 4,263 contracts, which relative to volume is approximately 20% below average, but this is the second day in a row that natural gas prices have advanced along with open interest.In order for December natural gas to generate a short-term buy signal, the low the day must be above OIA’s key pivot point for October 31 of $3.952. However, with a deflationary cycle gripping most commodities, natural gas prices may not rally much further unless there is a major old snap.

Gold: On October 30, December gold generated a short-term sell signal, which reversed the short-term buy signal of October 21. December gold remains on an intermediate term sell signal.

December gold lost $26.30 on heavy volume of 225,929 contracts. Volume was the strongest since October 15 when December gold advanced $10.50 on volume of 272,753 contracts and total open interest increased by 5,016. On October 30, total open interest declined by 1,196 contracts, which relative to volume is approximately 75% below average. As this report is being compiled on October 31, December gold is trading $27.40 lower and has made a daily low of 1160.50, which is a new contract low and takes out the recent previous low print of 1179.40 made during the week of June 24, 2013.

Yen: On October 30, the December yen generated a short-term sell signal, which reversed the short-term buy signal of October 14. The December yen remains on an intermediate term sell signal.

The December yen lost 47 pips on volume of 187,834 contracts. Total open interest increased by 8,166 contracts, which relative to volume is approximately 65% above average meaning new short sellers were entering the market and driving prices to a new low for the move (.9137).As this report is being compiled on October 31, the December yen is trading 219 pips lower and has made a new contract low of .8893, which is the lowest print since December 2007 of .8792. Stand aside.

Euro:

The December euro lost 33 pips on volume of 251,609 contracts. Total open interest increased by 6686 contracts, which relative to volume is average. As this report is being compiled on October 31, the December euro is trading 80 pips lower and has made a new contract low of 1.2489, which is the lowest print since the week of August 27, 2012 (1.2467). The December euro remains on a short and intermediate term sell signal. Stand aside.

Cotton:

December cotton lost 85 points on volume of 32,106 contracts. Volume fell from October 29 when December cotton advanced 88 points on volume of 34,433 contracts and total open interest increased by 2,749 contracts. On October 30, total open interest declined by 554 contracts, which relative to volume is approximately 25% below average. A decline of open interest on a price decline is healthy for the market. As this report is being compiled on October 31, December cotton is trading 1.22 cents lower and has made a daily low of 63.26.

On October 29, December cotton generated a short-term buy signal, and is usually the case after the generation of a buy signal, the market tends to pulls back from 1-3 days, and this is the opportunity to enter bullish positions if you’re so inclined. However, we want to remind clients that fundamentals for cotton are terrible, but this does not preclude the market from rallying further. What it does mean is that cotton can turn on a dime and head lower again.

For December cotton to continue its advance, it must make a daily low above OIA’s key pivot point for October 31 of 65.71, and will generate an intermediate term buy signal if the low the day is above OIA’s key pivot point for October 31 of 66.71. Due to burdensome stock levels globally, and weak demand, we cannot recommend bullish positions.

Coffee:

December coffee lost 2.00 cents on very heavy volume of 42,062 contracts. Volume was stronger than October 2 when 41,958 contracts were traded and December coffee closed at $2.0860. Volume was the strongest since August 7 when 42,271 contracts were traded and December coffee closed at 1.8815. On October 30, total open interest declined by 934 contracts, which relative to volume is approximately 15% below average. The December contract lost 4,745 of open interest and there were open interest increases in the March 2015 through May 2016 contracts.

In short, there were sufficient open interest increases in the forward months to reduce total open interest to a below average number. We consider this to be bearish open interest action relative to the price decline. We will find out more about the position of managed money when the COT report is released this afternoon and will report on it in the upcoming Weekend Wrap. As this report is being compiled on October 31, December coffee has closed at 1.8800, up 40 ticks from yesterday’s close. Although the market made a low of 1.8565 on October 31, it made a high of 1.8990, which is above OIA’s key pivot point for October 31 of 1.8870, which is needed for the generation of an intermediate term sell signal.Yesterday, the July 2015-March 2016 spread lost 40 ticks. Maintain the spread and exit the position upon penetration of the July 22 low of 3.10 cents premium to March 2016.