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Soybeans:

November soybeans advanced 13.25 cents on volume of 190,011 contracts. Total open interest increased by a hefty 10,803 contracts, which relative to volume is approximately 120% above average meaning that new longs were entering the market in heavy numbers and driving prices higher (9.24 1/2). There were open interest increases across the board, from November 2014 through May 2016. As this report is being compiled after the release of the USDA Quarterly Grain  Stocks Report, November soybeans are trading 7.75 cents lower and have made a daily low of 9.09 3/4, which is above the contract low of 9.05 1/2 made on September 29. Stand aside.

Soybean oil:

December soybean oil advanced 96 points on volume of 108,759 contracts. Volume increased from September 26 when December soybean oil lost 71 points on volume of 98,781 contracts and total open interest declined by 2,703 contracts. However, volume was below that of September 25 when December soybean oil closed down 2 points after making a new high for the move at 33.18 on volume of 126,544 contracts and total open interest increased by 785. On September 29, total open interest declined by 4,260 contracts, which relative to volume is approximately 55% above average meaning that liquidation was substantial on the advance.The October contract lost 4,644 of open interest, December 2014 -1049.

The liquidation on the advance is not surprising considering that managed money remains short soybean oil by ratio of 1.09:1 according to the most recent COT report. However, the short position has been declining for the past 3 weeks. The current ratio is the lowest since the COT tabulation date of August 5, 2014. As this report is being compiled after the release of the USDA Quarterly Grain Stocks Report, December soybean oil is trading down 61 points and has made a daily low of 32.24, which is above yesterday’s low of 31.75.We think soybean oil has terrific prospects for trade in the future, and we want to see the contango continue to narrow and eventually move into inversion (backwardation). December soybean oil has been unable to generate a short-term buy signal, and this is due primarily to the weakness in the rest of the bean complex . December soybean oil remains on a short and intermediate term sell signal. Stand aside.

Corn:

December corn advanced 2.75 cents on light volume of 140,543 contracts. Volume shrank from September 26 when December corn lost 3.00 cents on volume of 144,841 contracts and total open interest declined by 14,094 contracts. On September 29, total open interest increased by 3,568 contracts, which relative to volume is average.The December 2014 through September 2015 contracts all gained open interest. Yesterday, December corn made a new contract low of 3.22, and as this report is being compiled on September 30, December corn has made another contract low at 3.19 1/2. Stand aside.

Chicago wheat:

December Chicago wheat advanced 7.00 cents on volume of 57,898 contracts.Total open interest increased by 2,570 contracts, which relative to volume is approximately 65% above average meaning that new longs were aggressively entering the market in heavy numbers and driving prices higher (4.82 1/2).The December 2014 through December 2015 contracts all gained open interest. As this report is being compiled on September 30 after the release of the USDA report, December Chicago wheat is trading 2.50 lower and has made a daily low of 4.68, which is above its contract low of 4.66 1/4 made on September 25. Stand aside.

Live cattle:

December live cattle advanced 2.375 cents on volume of 69,273 contracts. Total open interest increased by 543 contracts, which relative to volume is approximately 55% below average. However, the October contract lost 3,185 of open interest, which makes the total open interest increase more impressive (bullish). Yesterday, December live cattle made a new all-time high of 1.65075 and as this report is being compiled on September 30 has not taken out yesterday’s all time high. As stated before, we think the most intelligent way to trade live cattle via futures is through a spread: buying December 2014 and selling February or April 2015.

WTI crude oil:

November WTI crude oil advanced $1.03 on surprisingly light volume of 542,293 contracts. Volume was only slightly higher than September 26 when November WTI advanced $1.01 on volume of 528,843 contracts and total open interest increased by 2,871 contracts. On September 29, total open interest increased only 3,701 contracts, which relative to volume is approximately 65% below average. The November contract accounted for a loss of 4,014 of open interest. The price and open interest action on September 26 and 29 is unimpressive to say the least and low volume indicates a lack of participation on moves higher.

As this report is being compiled on September 30, November WTI is trading $3.16 lower and has made a daily low of 90.86 on heavy volume.The December dollar index has sprinted to another contract high of 86.335, and this is having a major negative impact on precious metals as well. The move in WTI on September 30 is reminiscent of action after the release of a EIA report. At this juncture, we have been unable to ascertain the cause of the sharp move lower. November WTI will continue its down trend if the high for the day is below OIA’s key pivot point of 92.36, which makes it highly vulnerable to test the September 11 low of 89.56.. Stand aside.

Natural gas:

November natural gas advanced 12.5 cents on surprisingly light volume of 271,084 contracts. Volume was the highest since September 25 when November natural gas advanced 4.9 cents on volume of 336,126 contracts and total open interest declined by 12,828 contracts. The relatively low volume considering the magnitude of the advance is negative in our view. However, on September 29, open interest increased massively by 17,872 contracts, which relative to volume is approximately 160% above average meaning that aggressive new longs were entering the market in heavy numbers and driving prices higher (4.162 ) which is the highest print since August 28 (4.163).

September 29 was the first day that we saw an open interest increase on a price advance, which confirms the upward trend of the market. As clients know, we were concerned about the divergence between price action and open interest. Despite our positive view of natural gas, we remain concerned about the deflationary trend in commodities in general, and think that this could  pressure to natural gas prices from time to time. What natural gas needs to power it significantly higher is a cold snap, but it is early fall and this is unlikely.

For November natural gas to generate an intermediate term buy signal, the low of the day must be above OIA’s key pivot point for September 30 of 4.148. For those of you not involved in the natural gas market, we recommend waiting until Thursday after the release of the EIA natural gas storage report , which occurs at 9:30 a.m. CDT (10: 30 a.m. EDT ). Maintain bull call spreads recommended previously.

10 Treasury Note:

The December 10 year Treasury Note gained 10.5 points on light volume of 1,157,726 contracts. Volume shrank dramatically from September 26 when the December note lost 10 points on volume of 1,683,786 contracts and total open interest declined by 51,029 contracts. On September 29, open interest increased by a paltry 2,060 contracts, which is minuscule. This is somewhat surprising due to the tendency of market participants to be bearish on yields, which means they are bullish on treasury note prices.As this report is being compiled on September 30, the December note is trading just 1 point higher and has made a daily high of 124-275, which is below yesterday’s high of 124-280 and the September 26 high of 124-295. The December note remains on a short and intermediate term sell signal, which signals higher interest rates ahead.

Cocoa:

December cocoa closed unchanged on low volume of 17,562 contracts.Volume was the weakest since September 11 when December cocoa advanced $13.00 on volume of 16,871 contracts and total open interest declined by 812 contracts. On September 29, total open interest increased massively, this time by 2,954 contracts, which relative to volume is approximately 460% above average meaning that huge numbers of new longs and shorts were entering the market and neither side was able to move the market by the close.

For the past 2 days, we’ve seen massive increases of open interest, but this massive increase is not moving prices higher. As a matter of fact prices have been moving lower during the past 2 days with December cocoa losing $22.00. On September 26, December cocoa lost 22.00 on volume of 22,695 contracts and total open interest increased by 2826 contracts. During the past 2 days, total open interest has increased by 5,780 contracts and cocoa prices have fallen. We consider this to be a red flag and strongly advise a sideline stance, especially because December cocoa remains massively overbought.As this report is being compiled on September 30, December cocoa has closed 11.00 lower at $3,300. As we have stated before, we think the safest way to trade cocoa is through a spread: buying December 2014 and selling March May or July, but we advise waiting until the market pulls back further and blows out the weak longs.

Sugar #11:

March 2015 sugar advanced 24 points on volume of 130,521 contracts. Total open interest declined by 10,535 contracts, which relative to volume is approximately 230% above average meaning liquidation was extremely heavy on the advance. The October contract lost 9245 of open interest, March 2015 -4485.  For the past 2 days, March 2015 sugar advanced 72 points and total open interest declined by 26,627 contracts meaning that liquidation has been the dominant factor ever since sugar bottomed on September 22.

In yesterday’s report, we told clients that in order for March sugar to generate a short-term buy signal, the low the day had to be above OIA’s key pivot point of 17.00. The market hasn’t had the strength to even make a daily high at the pivot point. As this report is being compiled on September 30, March 2015 sugar has closed at 16.45, down 35 points. We think much of the rally was due to the action in the October contract, and since a hefty number of shorts have been blown out of the market, we would gingerly approach the short side on any rally. We would use today’s high of 16.91 as an exit point for bearish positions, but wait for another rally before initiating bearish positions. March 2015 sugar remains on a short and intermediate term sell signal.

Coffee:

December coffee gained 5.20 cents on unimpressive volume of 15,068 contracts. Volume was above that of September 26 when December coffee advanced 3.75 cents on volume of 14,418 contracts and total open interest declined by 1,174 contracts. On September 29, total open interest increased by 527 contracts, which relative to volume is approximately 40% above average meaning that new longs were entering the market in substantial numbers and driving prices higher (1.9195).

As this report is being compiled on September 30, December coffee has closed at 1.9335, up 2.10 cents. On September 30, December coffee made a high of 1.9730, which is the highest print since 1.9810 made on September 8, however December coffee was unable to hold the gain. In order for December coffee to generate a short-term buy signal , the low the day must be above OIA’s key pivot point for September 30 of 1.9210. December coffee remains on a short and intermediate term sell signal. Stand aside.