November soybeans gained 36.25 cents on volume of 255,068 contracts. Volume was the highest since October 11, when 369,720 contracts were traded, November beans closed 25.25 higher while open interest increased by 2,984 contracts. Additionally, volume was 42,990 contracts higher than October 15 (212,078) when soybeans made its low for the move at $14.853/4 and closed 30.00 cents lower.
In other words, volume on the advance was significantly greater than volume on the decline when the market made its low for the move. This is very positive. On October 18, total open interest increased by 3,331 contracts, which in relation to volume is approximately 45% less than average. The November contract lost 7,948 contracts of open interest, but there was sufficient buying in the forward months to offset the decline in November. This also is positive. As this report is being compiled on October 19, November soybeans are trading 6.50 lower and have made a low at $15.32 1/4. However, considering that the major equity indices are down sharply, along with precious metals and the petroleum complex, soybeans are acting well.
The long November-short January or February spread is not acting like it should with November showing independent strength, but this could change quickly. The fact that soybeans are not selling off significantly along with the rest of the markets indicates it is likely the bottom is in on the low made on October 15 of $14.85 3/4. Clients looking to enter long positions should wait until the end of the session (2:00 PM CDT) before doing so. For most markets, Friday is likely to be a sharply lower day, and any further selling in soybeans will likely occur by the end of the session. Keep in mind, that if the markets close sharply lower today, there is likely to be follow-through selling on Monday, which could negatively impact soybeans, if only temporarily.
December soybean meal closed $8.60 on volume of 50,548 contracts. Open interest increased by 2,629 contracts, which in relation to volume is slightly above 100% of average. In other words, commitments were heavy and active buying was pushing the market higher. As this report is being compiled, the long December 2012 short January or March spread is acting well with December showing greater strength than the deferred months. This is bullish spread activity. If speculators are looking to enter long positions today, they should wait until near the close at 2:00 PM CDT. The low in the December contract was made on October 17 at $450.20.
December corn closed 15.25 cents higher on volume of 204,342 contracts. Open interest increased by a whopping 13,119 contracts, which in relation to volume is 150% above average. The long December 2012, short March 2013 spread widened to 1.50 cents from 0.75 on October 17. This spread continues to widen on October 19, which is bullish. There is a rumor that Ukraine will impose an export ban in the middle of November, and this is boosting wheat sharply, which undoubtedly is benefiting corn as well. Despite bursts of buying, accompanied by increases in open interest, the fact remains that December corn has been unable to close above its 50 day moving average. The last time this occurred was September 10. Stand aside.
December wheat closed 12.25 cents on volume of 70,889 contracts. Open interest increased by 2,132 contracts, which in relation to volume is approximately 20% above average. As this report is being compiled on October 19, December wheat is trading 12.50 cents higher, while corn is trading 3.75 cents higher. Much of the gains in wheat can be attributed to the rumor of an export ban by Ukraine in mid November. If readers look a wheat chart that covers the past three months, it is readily apparent that the market continues to chop, and is trendless. Stand aside.
November crude oil gained 1.00 cents on volume of 533,036 contracts. Open interest increased by 8,830 contracts, which in relation to volume is approximately 30% less than average. Crude oil continues to trade poorly and the 50 day moving average is below the 200 day average on the continuation chart. Additionally, for the November contract, the 50 day moving average is under the 150 day average. We have been advising that long puts be implemented in the $92.00-93.00 area. As this report is being compiled, crude oil is trading $1.73 lower.
November heating oil lost .0028 cents on volume of 160,417 contracts. Open interest declined by 3,439 contracts, which in relation to volume is a bit less than average. As this report is being compiled on October 19, heating oil is trading 2.79 cents lower. Stand aside.
November gasoline lost 3.66 cents on volume of 157,238 contracts. Open interest declined by 11 contracts. As this report is being compiled on October 19, gasoline is trading 4.32 cents lower. Stand aside.
November natural gas gained 11.7 cents on volume of 487,122 contracts. Open interest increased by 11,476 contracts, which in relation to volume is average. On October 19, November natural gas made a high at 3.647, which is a little bit more than 1.00 cent above the high of 3.634 made on October 11 when natural gas advanced by 12.9 cents and volume was huge at 792,388. For the market to continue to advance, it must close above 3.634, and the low of the day must be above this as well.
December copper lost .0050 cents on volume of 50,008 contracts. Open interest increased by 2,730 contracts, which in relation to volume is approximately 115% above average. As our clients know, we have been skeptical of the move in copper, despite it being on a short and intermediate term buy signal, and has shown impressive congruity of price and open interest action. As this report is being compiled on October 19, December copper is trading 10.65 cents lower and the 50 and 200 day moving averages converge at $3.62. If the market closes below this, longs are likely to exit the market in large numbers, especially because the long to short ratio of managed money is at the very high end of its recent range. Undoubtedly today, copper will generate a short-term sell signal, but will not generate an intermediate term sell signal. Continue to stand aside.
December gold lost $8.30 on light volume of 112,686 contracts. Open interest increased by a minuscule 373 contracts. We have been advising clients to stand aside while waiting for a further correction. As this report is being compiled on October 19, December gold is trading $22.70 lower. Continue to stand aside.
December silver lost 36.4 cents on light volume of 35,143 contracts. Open interest declined by 567 contracts, which in relation to volume is approximately 30% less than average. We have been warning about the heavy build in open interest, and that speculative interest has been at stratospheric levels. On October 19, December silver is trading 76.3 cents lower, and has made a new low for the move at $31.945. This is the lowest price for December silver since September 4 when the low reached $31.575. Stand aside.
The December euro lost 62 points on volume of 237,391 contracts. Open interest declined by 1,848 contracts, which in relation to volume is approximately 60% less than average. For the past two sessions, price and open interest has been acting in a congruent fashion. The euro is on a short and intermediate term buy signal. While we understand that speculators would not want to be on the long side of the trade, we continue to advise that speculators not short the euro.
S&P 500 E mini:
The S&P 500 E mini lost 5.50 points on heavier than normal volume of 1,808,212 contracts. Volume was the highest since October 9 when 1,958,500 contracts were traded and open interest increased by 16,046 contracts while the S&P 500 E mini lost 13.75 points On October 18, open interest increased by a massive 74,078 contracts, which in relation to volume is 65% above average and a huge number. It is somewhat difficult to diagnose the massive open interest increase because the market made a high for the move at 1459.75, but then proceeded to sell off to its low of 1447.75. In other words was the open interest build a result of the rally or of the decline. It is interesting to note that volume between 11:10 am CDT and 1:40 p.m totaled 486,366 contracts, and this volume represents the the downside move from 1459.75 to 1447.75. In other words, approximately 25% of total volume occurred in a period of 2 hours and 30 minutes when the market was sliding. For quite some time we have been advising long put protection and as this report is being compiled on October 19, the E mini is trading 22.25 points lower. Continue to hold put positions.