OIA is announcing that there has been a major turn in some key currencies and are calling the yen, euro, British pound, and Australian dollar to have generated short term sell signals on November 1. Additionally, OIA has determined that the December dollar index generated a short-term buy signal. This has enormous implications for all commodities, and especially for those that have recently generated sell signals. With this new development, our opinion that precious may be turning around is likely to be modified. Additionally, though platinum has been acting well and is on a short and intermediate term buy signal, the rally in the dollar may serve to dampen enthusiasm for the white metal.

Soybeans: On November 1, January soybeans generated an intermediate term sell signal and had generated a short-term sell signal on September 30.

November soybeans lost 14.25 cents and January lost 14.75 on total volume of 183,572 contracts. Total open interest declined by 2,687 contracts, which relative to volume is approximately 40% less than average. The November contract lost 5,262 of open interest. It should be noted that we have not seen open interest increases when prices decline. We do see open interest declines when soybeans advance, and the next phase of the decline will be when open interest increases, especially after speculative longs have conducted most of their liquidation. As this report is being compiled on November 4, January soybeans are trading 3.25 cents higher while November beans are trading 4.75 lower. The USDA will release its reports, which will incorporate the October report on November 8. We advise clients to liquidate any positions prior to the report.

Soybean meal:

December soybean meal lost $8.70 on volume of 88,484 contracts. Total open interest declined by 1,251 contracts, which relative to volume is approximately 40% less than average. The December contract lost 4,822 of open interest, and there was open interest increases in the forward months which brought the total open interest increase down to a lower than average number. On October 31, December soybean meal generated a short-term sell signal, but remains on an intermediate term buy signal. A close below $387.60 would likely generate an intermediate term sell signal. All positions should be liquidated prior to the November 8 report.

Corn:

December corn lost 1 cent on heavier than normal volume of 337,050 contracts. Volume declined approximately 94,000 contracts from October 31 when corn lost 2 cents and open interest increased by 6,494 contracts. On November 1, total open interest declined by 854 contracts, which is minuscule and dramatically below average. The December contract accounted for loss of 17,244 of open interest,, and corn  had open interest increases in the forward months which brought down total open interest to a minor number. According to the most recent COT report, which was released late last week and was tabulated on October 22, shows that managed money is short corn by a ratio of 1.31:1. This ratio has been consistent for the 2 prior weeks (1.30:1 and 1.34:1). Although the fundamentals for corn continue to look terrible, this is in the market, however, if farmers continue to store corn, the basis will continue to remain firm. This could cause a good-sized short covering rally, and therefore we discourage short positions at current levels. In any event, clients should be flat into the report.

Wheat: On November 1, December Chicago wheat generated a short and intermediate term sell signal. On November 1, December Kansas City wheat generated a short-term sell signal, but remains on an intermediate term buy signal.

December Chicago wheat advanced 0.25 cents on heavy volume of 108,126 contracts. Volume declined approximately 30,000 contracts from October 31 when December Chicago wheat lost 7.50 and total open interest declined 5,939 contracts. On November 1, total open interest declined by 3,585 contracts, which relative to volume is approximately 30% above average, meaning that liquidation was fairly heavy on the decline. The December contract lost 10,282 of open interest.

Kansas City wheat declined 7.00 cents on heavy volume of 24,871 contracts. Total open interest declined by 1,252 contracts, which relative to volume is approximately 100% above average meaning that liquidation was extremely heavy on heavy volume. The December contract lost 2,032 of open interest. As this report is being compiled on November 4, December Chicago wheat is trading 4.50 cents lower and KC -3.25. Although we are bullish wheat, we have cautioned clients to remain on the sidelines. All open positions be liquidated prior to the November 8 report.

Cotton:

December cotton lost 60 points on volume of 25,851 contracts. Total open interest declined by 95 contracts, however the December contract lost 2,465 of open interest while open interest increased in the March, May, July and December 2014 contracts. This brought down total open interest to a minor number. As of the latest COT report, which was tabulated on October 22, managed money was long cotton by a ratio of 3.88:1, which was down from the previous week of 4.75:1 and the  prior 2 weeks of 6.30:1. In short, managed money is reducing their long exposure, and we suspect this has accelerated since October 22. On October 22, December cotton closed at 82.45 and on October 29 (which will be the date of the current CO2 report), December cotton closed at 78.34.

As this report is being compiled on November 4, cotton is trading 49 points lower and has made a new low for the move at 75.89. Remarkably, cotton has declined for 11 consecutive days, and it appears likely headed for the 12th consecutive decline. As we said on October 18: “For futures traders who are inclined to initiate short positions at current levels, we recommend using the October 18 high of 84.40 to exit these positions.” December cotton never traded near the 84.40 exit point, and we have encouraged clients with short positions to stay with the trade. The market is massively oversold and we will not know the extent to which managed money has liquidated until the release of the October 29 COT report. This report should be released within the next day or two and we will post it immediately. A note of caution: We think it it is wise to cover short positions prior to the November 8 report.

Live cattle:

December live cattle lost 65 points on volume of 62,026 contracts. Total open interest declined by 5,034 contracts, which relative to volume is approximately 220% above average meaning that liquidation was extremely heavy on heavier than normal volume. It should be noted  the open interest decline on November 1 was the heaviest in more than 2 weeks, and is the first real sign that market participants are beginning to throw in the towel. According to the COT report released late last week and tabulated on October 22, managed money is long cattle by a ratio 4.21:1, which is above the ratios of the previous 2 weeks of October 15 and October 8 (3.85:1 and 3.32:1). In short, we expect to see more liquidation ahead and continue to advise clients to remain on the sidelines. Cattle remains on a short and intermediate term buy signal, however, if December cattle closes below 1.31800, a short-term sell signal would likely be generated. Continue to stand aside, but after this liquidation phase is complete, we think cattle prices will head higher once again.

Crude oil:

December crude oil lost $1.77 on low volume of 577,812 contracts. Remarkably, volume increased only approximately 7,000 contracts from October 31 when December crude lost 39 cents and open interest declined 2,108 contracts. The December contract lost 16,122 of open interest, and there was sufficient open interest increases in the forward months to bring down total open interest to a minor number. As this report is being compiled on November 4, December crude oil is trading 30 cents higher and has made a new low for the move at 94.06. The market is way overdue for a good-sized countertrend rally, and we expect this at any time. Remarkably, the October 22 COT report showed that managed money was long crude oil by a ratio of 6.17:1, which was in the range of the previous 2 weeks (6.04:1 and 6.29:1). Looking at the open interest stats since October 22, we think there is a high likelihood that managed money will increase their liquidation. Continue to hold short call positions recommended on September 29. OIA announced that crude oil generated a short-term sell signal on September 23 and an intermediate term sell signal on October 21.

Natural gas:

December natural gas lost 6.8 cents on volume of 290,933 contracts. Total open interest declined 2,969 contracts, which is approximately 50% less than average. The December contract accounted for loss of 3,544 of open interest. On November 1, natural gas made a new low for the move at $3.508 and as this report is being compiled on November 4 has made another new low at 3.406, which is the lowest price for 2013 and a new contract low. On October 23, OIA announced that natural gas had generated a short-term sell signal and it had already been on an intermediate term sell signal. We have no recommendation at this juncture. Stand aside.

Platinum:

January platinum advanced $3.50 on healthy volume of 13,566 contracts. Total open interest increased by 1,588 contracts, which relative to volume is approximately 280% above average. Although the open interest increase was huge, prices were only able to move fractionally higher. As we indicated at the top of the report, our enthusiasm for platinum may need to be tempered due to the short-term sell signals in the euro, British pound Swiss franc, and yen which are key currencies in the dollar index. Additionally, as we mentioned in the November 3 Weekend Wrap, the dollar index generated a short-term buy signal on November 1. If long, use the exit point of $1440, and if the market closes below 1437.50 and 1432.50 we would turn negative on the metal.

Gold: We are suspending further reports on gold until we begin to see a trading opportunity.

Silver: We are suspending further reports on silver until we begin to see a trading opportunity.

Euro: On November 1, the December euro generated a short-term sell signal, but remains on an intermediate term buy signal.

The December euro lost 99 points on heavier than normal volume of 242,434 contracts. Total open interest declined by 13,562 contracts, which relative to volume is approximately 120% above average meaning that liquidation was extremely heavy on the decline. As is usually the case after the generation of a sell signal, the market rallies for 1-3 days, which is the optimum time to initiate bearish positions. The COT report tabulated on October 22 showed that managed money was long by a ratio of 3.18:1, which is approximately the same as the previous week, but below the ratio of 2 weeks prior (October 8) 3.61:1. Based upon the performance of open interest, we think there is more liquidation ahead by managed money. As this report is being compiled on November 4, the December euro has rallied 26 points and has made a high of 1.3526. We think the market could rally to 1.3550-1.3593 before resuming its downtrend.

Australian dollar: On November 1, the December Australian dollar generated a short-term sell signal, but remains on an intermediate term buy signal.

The Australian dollar lost 22 points on volume of 74,890 contracts. Total open interest increased by 201 contracts, which is minuscule and dramatically below average. Of the currencies that generated a short-term sell signals on November 1, we think it is possible the Australian dollar sell signal will turn out to be false. If the Australian dollar generates a short-term buy signal, we would enthusiastically recommend bullish positions. As of the latest COT report tabulated on October 22, managed money remains short the Australian dollar by a ratio of 1.50:1, which is slightly below the ratio of October 15 of 1.70:1 but about the same as the ratio of 2 weeks ago of 1.51:1.

S&P 500 E mini:

The S&P 500 E mini gained 3.75 points on volume of 1,604,705 contracts. Total open interest increased by 26,541 contracts, which relative to volume is approximately 30% less than average. As this report is being compiled on November 4, the E mini is trading 6.50 points higher, but has not made a new high for the move. This occurred on October 30 at 1773.25. We continue to recommend long put protection for those holding long equity positions.