Soybeans:

November soybeans closed unchanged on volume of 267,863 contracts. Interestingly, volume increased approximately 29,000 contracts from October 4, when soybeans advanced 19.75 cents and open interest declined by 1,299 contracts. What makes this interesting is that the range on October 4 was 37.75 and was only 25.00 cents on October 5. In other words, on October 4, the range was significantly higher than on October 5, yet volume didn’t expand on October 4, despite the market closing 19.75 higher.

Ideally, we want to see volume increasing when price advances and volume contract when prices decline, or when the range contracts. On October 5, open interest increased by 4,595 contracts, which in relation to volume is approximately 30% less than average. Until the USDA releases its report on October 11, speculators will be squaring positions in anticipation of the report. It is generally agreed, that yield per acre will rise, and the question is: how much of this has the market discounted. On October 3, November soybeans made its low for the move at $15.04. Conceivably, we could retest this low before the report especially if the equity markets fall sharply. Remember: November soybeans are on a short and intermediate term sell signal. As we recommended in the Weekend Wrap, a safer way to take advantage of an upside move in soybeans is to buy the January 2013 contract and sell March 2013.

Soybean meal:

December soybean meal gained $2.30 on light volume of 57,235 contracts. Open interest increased by a mere 83 contracts, but it was the first time soybean meal saw an increase since September 14 when soybean meal declined $5.90 and open interest increased by 4,600 contracts. The October contract, which is going off the board shortly lost 708 contracts, while December meal added 180 contracts. We like the long side of soybean meal, and as suggested in the Weekend Wrap, speculators can take advantage of any upside move by buying the December 2012 contract, and selling the March 2013 contract. Soybean meal is on a short term sell signal, but remains on an intermediate term buy signal.

Corn:

December corn lost 9.00 cents on light volume of 160,539 contracts. Open interest declined by 4,529 contracts, which in relation to volume is average. During the past two days, open interest has declined by 7,849 contracts while December corn has declined by 8.75 cents In our view, corn will likely trade in a sideways to lower pattern until the October 11 USDA report. Stand aside.

Wheat:

December wheat lost 11.75 cents on light volume of 59,086 contracts. Open interest increased by 866 contracts, which in relation to volume is approximately 25% less than average. The spread between wheat and corn has narrowed considerably due to wheat’s underperformance. At this juncture, we see no reason to be involved with wheat on the long or short side. Since July 24, December wheat has been trading in a sideways pattern, punctuated by spikes up and down. The market seems unable to break out decisively one way or the other. On September 27, December wheat generated a short-term sell signal, but has not generated in intermediate term sell signal. Stand aside.

Crude oil:

November crude oil lost $1.83 on volume of 574,256 contracts. Volume increased by approximately 21,500 contracts from October 4 when crude oil advanced $3.57 and open interest declined by 14,440 contracts. In other words, on October 4, crude oil prices increased by twice the amount than October 5, yet volume was higher on October 5 when crude oil declined by $1.83. On October 5, open interest increased by 12,910 contracts, which in relation to volume is average. For the past four trading sessions, open interest action relative to price has been bearish, i.e., open interest declines on rallies and increases on declines. Stand aside.

Heating oil:

November heating oil lost 3.25 cents on volume of 164,962 contracts. Open interest increased by 2,541 contracts, which in relation to volume is approximately 30% less than average. Stand aside.

Gasoline:

November gasoline gained .0096 cents on volume of 151,151 contracts. Open interest increased by 815 contracts. Stand aside.

Copper:

December copper declined .0080 cents on volume of 46,934 contracts. Open interest increased by 1,006 contracts, which in relation to volume is average. Although copper is on a short-term and intermediate term buy signal, we do not like the way copper has been trading. Stand aside.

Gold:

December gold lost $15.70 on volume of 167,105 contracts. Volume declined by approximately 6,000 contracts from October 4, when gold advanced 16.70 and open interest increased by 8,491 contracts. On October 5, open interest declined by 5,989 contracts, which in relation to volume is approximately 45% above average. We want to see more days like October 5, before we can recommend long positions.

Silver:

December silver lost 52.9 cents on volume of 44,987 contracts. Volume increased on October 5, compared to October 4, when 38,377 contracts were traded and silver advanced 41.1 cents while open interest increased by 1,274 contracts. On October 5, open interest declined by 539 contracts, which in relation to volume is approximately 60% less than average. The decline of open interest in silver compared to gold on October 5 was disappointing. The decline of open interest in gold was a healthy number, whereas the decline of open interest in silver was minor in comparison. We need to see a major washout in silver before it is safe to enter on the long side. Stand aside.

Euro:

The December euro advanced 14 points on volume of 247,493 contracts. Open interest increased by 682 contracts, which is considerably less than average. Open interest action relative to price is positive, and until this changes, we think the market will trade higher.

S&P 500 E mini:

The S&P 500 E mini lost 0.25 points on volume of 1,682,206 contracts. Open interest increased by a meager 2,831 contracts. In the Weekend Wrap, we analyzed performance of the S&P 500 E mini, and expressed our skepticism about a major move higher at this juncture. We suggest readers review the Weekend Wrap to bring them up to speed, if they haven’t done so already. Long put protection should be in place.