November soybeans closed 30.25 cents higher on heavy volume of 319,432 contracts. Volume was the highest since July 19 when 399,183 contracts were traded and soybeans closed at $17.33 3/4. On July 20, soybeans made its interim high at 17.77 3/4 and volume was somewhat less than Friday’s at 317,256 contracts. On September 28, total open interest declined by 1,669 contracts, which in relation to volume is 70% below average. The November contract shed 5,083 contracts of open interest, which indicates that old longs were taking advantage of the rally to exit positions, and shorts decided to liquidate as well.
As this report is being compiled on October 1, November soybeans are trading down 38.50 and is testing the low made on September 27 of $15.57 1/2. This week will be relatively slow because of the China Golden Week, which gives Chinese citizens an opportunity to take some time off. Additionally, the market is experiencing pressure due to the very early harvest, which is negatively affecting the cash market. If the market breaks below 15.57, then 15.50 is the next level of support and after that the 15.05 area. On September 21, soybeans generated a short-term sell signal, but has not generated in intermediate term sell signal. As we have pointed out before, there are a hefty number of speculative longs in soybeans, and they may need to be flushed out before the market makes a bottom.
December soybean meal gained $13.00 on volume of 81,476 contracts. Soybean meal volume declined from the previous day, while soybean volume increased by nearly 100,000 contracts. The total decline of open interest on September 28 was 1,123 contracts and open interest in the December contract declined by 282 contracts. From September 17 through September 28, total open interest has declined by 30,574 contracts while December soybean meal has declined by $38.50. During the same time frame, soybean open interest has declined by 11,163 contracts while November soybeans have declined by $1.38. In other words, the disproportionate amount of liquidation in soybean meal continues. Again, we view this as positive. As this report is being compiled on October 1, December soybean meal is trading down $8.80. If the market is unable to hold the September 27 low of $470.90, there is minor support at 468.00 and 463.00 and major support at 454.00, which was the low made on July 24, 2012. On September 21, soybean meal generated a short-term sell signal, but has not yet generated in intermediate term sell signal.
December corn advanced the 40.00 cent limit on heavy volume of 369,867 contracts. Volume was higher than on August 13 when 363,844 contracts were traded, but did not exceed the volume on August 10 of 457,645 contracts when corn closed at $8.00. The open interest increase was spectacular at 26,547 contracts, which in relation to volume is approximately 185% above average. As indicated in the Weekend Wrap, we can envision corn rallying to its 50 day moving average of $7.88, but how much further than that is questionable because demand starts shutting down when corn trades over $8.00. Additionally, harvest pressure will weigh on corn prices. On September 11, December corn generated a short-term sell signal, but has not yet generated in intermediate term sell signal. Stand aside.
December wheat gained 47.00 cents on heavy volume of 164,789 contracts. Volume was higher than August 13 when 163,452 contracts were traded but was significantly lower than the volume of August 10 when 193,530 contracts were traded and wheat closed at $8.85 1/4. On September 27, December wheat generated a short-term sell signal, but did not generate a short-term buy signal on September 28, nor will it generate a short-term buy signal on October 1. As this report is being compiled on October 1, December wheat is trading 25.75 lower while corn is trading 2.25 cents higher. Stand aside.
November crude oil advanced 34.00 cents on very light volume of 360,459 contracts. Volume was lighter than September 24 when 363,835 contracts were traded and crude oil declined by 64.00 cents while open interest declined by 2,510 contracts. On September 28, open interest declined by 6,912 contracts, which in relation to volume is 25% below average. The market continues to trade in a bearish fashion and on September 20, November crude oil generated a short-term sell signal, but has not yet generated in intermediate term sell signal. Stand aside.
November heating oil gained .0084 cents on volume of 149,177 contracts. Open interest declined by 3,791 contracts, which in relation to volume is average. Stand aside.
November gasoline gained 2.29 cents on volume of 147,151 contracts. Open interest declined by 1,471 contracts, which in relation to volume is approximately 60% below average. During the past four trading sessions ,open interest has declined by 18,609 contracts while gasoline prices have advanced 13.24 cents. This is bearish open interest action relative to price. Stand aside.
December copper gained 1.40 cents on fairly light volume of 47,449 contracts. Open interest declined by 623 contracts, which is significantly below average. During the past two days copper has advanced 4.80 cents while open interest has declined by 559 contracts. Although we would not short the market due to copper being on a short and intermediate term buy signal, we do not see a trade on the long side either. Stand aside.
December gold declined $6.60 on lighter than normal volume of 168,323 contracts. Open interest declined by 5,628 contracts, which in relation to volume is approximately 20% above average. Due to the significant build in open interest during the past couple of weeks, it is healthy to see price and open interest decline, however, we believe there is more to go on the downside. As we are writing this report on October 1, gold has made a new high at $1794.40, which took out the old high of $1790.00 made on September 21. Stand aside and wait for a correction down to the 1720 area.
December silver lost 8.9 cents on volume of 51,275 contracts. Open interest declined by 256 contracts. The market remains overbought, and as we have indicated on numerous occasions, speculators should stand aside and wait for a correction. On October 1, silver made a new high at $35.445, which took out the old high of $35.26 made on September 21.
The December euro lost 65 points on volume of 306,044 contracts. Open interest declined by 2,775 contracts, which in relation to volume is 65% less than average. The price and open interest action continues to act positively and speculators should not short the euro. Stand aside.
S&P 500 E mini:
The December S&P 500 E mini lost 6.75 points on volume of 2,111,625 contracts. Open interest increased by 9,617 contracts. As we have advised the past, long put protection should be in place. This is especially important if anyone has outstanding long positions in equities. For a further information on our views about the S&P 500, please consult the September 30 Weekend Wrap.