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Soybeans:

November soybeans lost 10.25 cents on heavy volume of 275,459 contracts.Volume was the strongest since June 30 when 337,009 contracts were traded and November soybeans closed at 11.57 1/4. On September 30, total open interest declined by 5,435 contracts, which relative to volume is approximately 20% below average. The November contract accounted for loss of 9,442 of open interest. As this report is being compiled on October 1, November soybeans are trading unchanged on the day after making a new contract low of 9.04, which takes out the previous contract low of 9.05 1/2 made on September 29.

The current stocks on hand number supplied by the USDA in yesterday’s report was a big surprise at 92 million bushels, which is among the lowest recorded during the past 40 years. However, it had no positive impact on the market, and soybeans continue to be burden by the impending large crop and ideal growing conditions. Stand aside.

Soybean oil:

December soybean oil lost 58 points on volume of 85,689 contracts. Total open interest declined by 1,753 contracts, which relative to volume is approximately 20% below average. The October contract accounted for loss of 1,824 of open interest, December -3,197. As this report is being compiled on October 1, December soybean oil is trading 48 points higher and has made a daily high of 32.99, which is shy of yesterday’s high of 33.02.

The Malaysian palm oil market has been on fire having gained 16.35% since September 2.This is the strongest monthly performance since April 2009. This is significant and indicates that demand for vegetable oils is improving, which should begin to positively impact soybean oil. December soybean oil barely budged during September 2 through September 30 having gained just 0.72%. Soybeans are keeping a lid on soybean oil prices, but we see this condition changing as demand improves.For December soybean oil to generate a short-term buy signal, the low the day must be above OIA’s key pivot point for October one of 33.05. We think this is inevitable. December soybean oil remains on a short and intermediate term sell signal. Stand aside.

Corn:

December corn lost 5.00 cents on volume of 258,156 contracts. Volume was the strongest since September 11 when 266,751 contracts were traded and December corn closed at 3.41. On September 30, total open interest increased by 3,814 contracts, which relative to volume is approximately 40% below average. The December contract accounted for loss of 2,472 of open interest. December corn made a new contract low yesterday at 3.19 1/2, and this has been taken out on October 1 with another contract low of 3.18 1/4.

The USDA reported corn stocks at 1.236 billion bushels, which was significantly above expectations. This, combined with the massive crop, will continue to pressure prices. Stand aside.

Chicago wheat:

December Chicago wheat lost 3.50 cents on volume of 91,099 contracts. Total open interest increased by 5,157 contracts, which relative to volume is approximately 120% above average. There was open interest increases across the board. As this report is being compiled on October 1, December Chicago wheat is trading 1.75 cents higher and has made a daily high of 4.84, which is the highest print since September 24 (4.84 1/2).

The USDA reported stocks for the end of the 1st quarter of the new season at 1.914 billion bushels, which is up 2% from last year. Stand aside.

WTI crude oil:

November WTI crude oil lost $3.41 on very heavy volume of 873,849 contracts.Volume was the strongest since September 11 when WTI advanced $1.16 on volume of 952,291 contracts and total open interest declined by 8,580 contracts. On September 30, open interest increased by 7,180 contracts, which relative to volume is approximately 50% below average. The November contract accounted for loss of 10,555 of open interest, which makes the minor increase of total open interest more impressive (bearish).With the massive downside move yesterday, we expected either a significant build of open interest or a significant decline. The minor increase indicates that market participants are not willing to bet on lower prices in significant numbers.During the course of the bear market in WTI, we have continued to point out the refusal of market participants to enter bearish positions as prices move lower. The action yesterday puts a fine point on this.

As this report is being compiled on October 1, November WTI is trading 50 cents lower and has made a daily high of 92.96, which is above OIA’s key pivot points for October 1 of 92.33, and the 2nd pivot point of 91.55. The downtrend will continue if the daily high is below the 2 pivot points. November WTI remains on a short and intermediate term sell signal. Stand aside.

From the September 29 report:

“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.”

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.4 million barrels from the previous week. At 356.6 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Total motor gasoline inventories decreased by 1.8 million barrels last week, and are in the middle of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories decreased by 2.9 million barrels last week and are near the lower limit of the average range for this time of year. Propane/propylene inventories rose 0.4 million barrels last week and are above the upper limit of the average range. Total commercial petroleum inventories decreased by 5.8 million barrels last week.

Brent crude oil:

November Brent crude oil lost $2.53 on volume of 768,513 contracts.Volume was the strongest since September 11 when 844,250 contracts were traded and November Brent crude oil advanced 8 cents. On September 30, total open interest increased by a massive 26,357 contracts, which relative to volume is approximately 40% above average meaning that aggressive new short sellers were entering the market in heavy numbers and driving prices to a new contract low (94.24). This is the lowest price for Brent crude oil on the continuation chart since June 2012. Note the vast difference in open interest between WTI and Brent on the price decline of September 30. Stand aside.

Natural gas:

November natural gas lost 3.3 cents on volume of 276,910 contracts. Total open interest declined by 4,287 contracts, which relative to volume is approximately 45% less than average. The November contract accounted for loss of 10,736 of open interest. As this report is being compiled on October 1, November natural gas is trading 6.2 cents lower after making a new high for the move at 4.184, which takes out yesterday’s high of 4.178.Natural gas is trading at the upper end of previous trading ranges where rallies have failed. Caution should be exercised, especially because the EIA natural gas storage report will be released tomorrow at 9:30 a.m. CDT. Continue to hold bull call spreads.

Dollar index:

The December dollar index gained 33.1 points on volume of 35,997 contracts.Total open interest increased by 914 contracts, which relative to volume is average. Yesterday, the December dollar index made a new contract high at 86.335, and on October 1 has been unable to take out this high. The market remains massively overbought, and when the correction comes, it could be a doozy. The dollar index remains on a short and intermediate term buy signal. Stand aside.

Cocoa:

December cocoa lost $11.00 on volume of 15,164 contracts. Total open interest increased again, this time by a massive 1,334 contracts, which relative to volume is approximately 250% above average, meaning that both longs and shorts were aggressively entering the cocoa market in heavy numbers, and the shorts had the edge by driving prices lower. There were open interest increases across the board.

In yesterday’s report, we expressed our concern about the massive increase of open interest on September 26 and 29 and that the net effect of this was a loss of 22.00 in the December contract. Including the open interest increase on September 30, open interest from September 26 through September 30 has increased by 7,111 contracts while the December contract has lost 33.00 during the 3 day time frame. This clearly indicates that shorts are in control, at least for now. As this report is being compiled on October 1, December cocoa is trading down $128.00, or 3.88% and has made a daily low of 3,150, which is the lowest print since September 18 (3156).

In order for December cocoa to resume its uptrend, the low the day must be above OIA’s key pivot point for October 1 of 3,248. A short-term sell signal will be generated if the high for the day is below OIA’s key pivot point for October 1 of 3,183. In tomorrow’s report, it will be important to see open interest decline for the trading activity of today. If we do not see liquidation in tomorrow’s report, selling pressure will continue and rallies will be muted by longs trying to recoup losses, or increase gains. December cocoa remains on a short and intermediate term buy signal. Stand aside.

From the September 29 report:

“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: We are suspending coverage on sugar until we see a trading opportunity or a change of signal.

March 2015 sugar lost 35 points on volume of 126,187 contracts. Total open interest declined by 12,147 contracts, which relative to volume is approximately 300% above average meaning that liquidation was extremely heavy on the decline. The October contract lost 6,784 of open interest, March 2015 -8,815. As this report is being compiled on October 1, March sugar is trading 44 points lower and has made a daily low of 15.89, which is the lowest print since September 24 (15.64). In yesterday’s report, we recommended waiting for a rally of one more day before initiating bearish positions, and unfortunately the market did not accommodate us. March wheat 2015 sugar remains on a short and intermediate term sell signal. Stand aside.

Coffee: December coffee will generate a short and intermediate term buy signal on October 1.

December coffee advanced 2.10 cents on fairly heavy volume of 22,850 contracts. Interestingly, volume increased from September 29 when December coffee advanced 5.20 cents on volume of 15,068 contracts and total open interest increased by 527 contracts. Additionally, volume on September 30 exceeded that of September 24 when coffee advanced 8.20 cents on volume of 22,252 contracts and total open interest increased by 199 contracts.

Although, the volume was impressive, the major increase of open interest of 1,476 contracts on September 30 was even more so. Relative to volume, the total open interest increase was approximately 140% above average meaning that new longs were aggressively entering the market in heavy numbers and driving prices to a new high for the move of $1.9730, which is the highest print since September 8 (1.9810). As this report is being compiled after the close of trading on October 1, December coffee has closed at 2.0040, up 7.05 cents and has made a new high for the move at 2.0185, which is the highest print since September 5 (2.0280).

Now the December coffee is on a short and intermediate term buy signal, we recommend waiting for a pullback, which usually lasts from 1-3 days, and this is the opportunity to initiate bullish positions. However, coffee is notoriously volatile and we recommend using options as opposed to futures.

An alternative is to trade the coffee ETN, ticker symbol JO, which tracks the movement of the futures contract rather well. For example, year to date, JO is trading 69.31% higher while the December coffee contract is trading  +60.99% year to date.