Soybeans:

November soybeans lost 2.00 cents while January advanced 5.00 on volume of 138,320 contracts. Total open interest increased by 4,155 contracts, which relative to volume is approximately 20% above average. The November contract lost 5,382 of open interest. As this report is being compiled on November 5, January soybeans are making new lows and the January contract is trading 8.75 cents lower while November is – 7.50. On November 1, January soybeans generated an intermediate term sell signal, which confirmed the short term sell signal generated on September 30. Undoubtedly, the market is in the process of discounting what will probably be a somewhat bearish USDA report to be released on November 8. We have been recommending a sideline stance and suggest to clients who hold open positions, that they be liquidated prior to the report.

Soybean meal:

December soybean meal lost $2.00 on volume of 52,847 contracts. Total open interest declined by 1,387 contracts, which relative to volume is average. For the past 3 days beginning on October 31, soybean meal has seen much heavier liquidation relative to volume than soybeans. Additionally, according to the October 22 COT report, managed money is twice as long in soybeans and soybean meal. As this report is being compiled on November 5, December soybean meal is trading $3.40 lower, and has made a new low at 392.00. On October 31, December soybean meal generated a short-term sell signal, but remains on an intermediate term buy signal. We have recommended a stand aside posture in meal and any open positions held by clients should be liquidated prior to November 8 report.

Corn:

December corn lost 1 cent on volume of 296,740 contracts. Total open interest increased by 13,859 contracts, which relative to volume is approximately 80% above average meaning that new shorts and longs were entering the market aggressively but shorts were able to move the market just fractionally lower. From the October 22 COT report when managed money was short by a ratio of 1.31:1, through November 4, December corn has declined 12.00 cents while open interest has increased by a massive 55,974 contracts. The decline in corn continues to be incremental even though open interest is increasing by a substantial amount. Our experience tells us when heavy short selling is barely able to move a market lower, a near a temporary bottom is likely. In addition, the massive build of open interest under these circumstances leads us to believe that a massive explosion in price is about to occur. We strongly advise against bearish positions at current levels and recommend all positions be liquidated prior to the November 8 report.

Wheat:

December Chicago wheat lost 5.00 cents on volume of 69,863 contracts. Volume declined approximately 39,000 contracts from November 1 when December Chicago wheat lost 7.00 cents and open interest declined by 3,585 contracts. On November 4, total open interest increased by 593 contracts, which relative to volume is approximately 50% less than average. However, the December contract lost 3,490 of open interest, which makes the total open interest increase much more impressive (bearish).

December Kansas City wheat lost 4.25 cents on volume of 15,092 contracts. Volume declined by approximately 9,600 contracts from November 1 when December Kansas City wheat declined 7.00 cents and open interest declined by 1,252 contracts. On November 4, open interest declined for the 2nd day in a row by 1,468 contracts, which relative to volume is approximately 275% above average meaning that liquidation was extremely heavy in Kansas City wheat. As we pointed out yesterday’s report, the open interest decline in KC wheat indicates that market participants who are long at higher levels are beginning to give up.

As this report is being compiled on November 5, December Chicago wheat is trading 5.50 lower and has made a new low for the move at 6.55 3/4. KC wheat is trading 5.00 cents lower and has made a new low for the move at $7.22 1/2. On November 1, December Chicago wheat generated a short and intermediate term sell signal while December Kansas City wheat generated a short-term sell signal, but it remains on an intermediate term buy signal. We have no recommendations with respect to wheat at this juncture. If clients are holding positions, we recommend these be liquidated prior to the November 8 report.

Cotton:

December cotton lost 63 points on volume of 26,705 contracts. Total open interest declined by 1,852 contracts, which relative to volume is approximately 170% above average meaning that liquidation was heavy on the decline. On November 4, total open interest in all contracts stood at 195,355 contracts. This is the lowest open interest since September 27 when total open interest in all contracts stood at 195,370 and December cotton closed at 86.63. When the move began on September 6, total open interest in all contracts stood at 169,434 contracts and December cotton closed at 83.21. The purpose of the aforementioned stats is to show clients that current high open interest indicates there are large numbers of longs who have not liquidated. These distressed longs will be forced to liquidate, which may explain why cotton has declined for 13 day consecutive days beginning on October 18. As this report is being compiled, it would appear that November 5 will be the 14th consecutive day of declines with cotton trading 48 points lower and making a new low. As mentioned yesterday, we think cotton prices are headed lower, but as the November 8 report nears, we could see a spate of short covering. We think that clients who initiated long positions on October 18 should consider covering them prior to the report. Cotton remains on a short and intermediate term sell signal.

Live cattle:

December live cattle gained 2.5 points on volume of 53,463 contracts. Total open interest increased by 2,432 contracts, which relative to volume is approximately 75% above average meaning that new longs and shorts were entering the market, but neither side was able to move the market much. However, the December contract lost a hefty 5,234 contracts of open interest, which makes the total open interest increase much more impressive (bearish). If December cattle closes under 1.31800, a short-term sell signal would likely be generated. When we receive the COT report for October 29, we will have a much better idea the extent to which managed money remains long cattle. If the long to short ratio is at an elevated level, (which we suspect it will be) more liquidation is ahead. Although cattle remains on a short-term buy signal (and intermediate term buy signal), we think it is a matter of  days before a short-term sell signal is generated. Continue to stand aside.

Crude oil:

December crude oil gained 1 cent on low volume of 473,166 contracts. Total open interest declined by 11,997 contracts, which relative to volume is average, but is a significantly large number considering the narrow range ($1.05) and lackluster volume. Crude oil has been remarkably weak and has been unable to mount even a small rally. This leads us to believe the long to short ratio of managed money continues at elevated level. The October 29 COT report will provide additional information. As this report is being compiled on November 5, December crude oil is trading $1.45 lower and has made a new low for the move at 93.07. OIA announced on September 23 that crude oil generated a short-term sell signal and that an intermediate term sell signal was generated on October 21. Clients who took our advice and shorted calls on September 29 should stay with the trade.

Natural gas:

December natural gas lost 6.8 cents on volume of 261,416 contracts. Total open interest declined by 1,960 contracts, which relative to volume is approximately 60% less than average. The December contract lost 634 of open interest. As this report is being compiled on November 5, natural gas is trading 1.9 cents higher after making a new low for the move the $3.379. On October 23, OIA announced that December natural gas generated a short-term sell signal and was already on an intermediate term sell signal. We have no position to recommend at this juncture. Stand aside.

Platinum:

January platinum gained $4.30 on light volume of 5,373 contracts. Total open interest declined by 175 contracts, which relative to volume is approximately 25% above average meaning that market participants were liquidating on the advance. January platinum made a high of 1458.7 on November 4, and this was 20 cents shy of the high of 1458.90 made on November 1. On November 5, January platinum broke above those two previous highs at 1459.7 and is currently trading $6.40 lower. The daily low of 1448.30 on November 5 is above the low of November 1 (1445.80 and October 31 (1446.70).

We like platinum from the long side and it generated a short and intermediate term buy signal on October 29. Despite the weakness in gold and silver, platinum has held up very well. However, as we have pointed out in previous reports, our concern is that the yen, pound, euro and Swiss franc are on short-term sell signals (major currencies of the dollar index) and the dollar index is on a short-term buy signal. We see further dollar strength, which is bearish for precious metals. For those who want to trade platinum, we suggest using an exit point slightly below $1440. A close below 1437.50 and 1432.50 would generate a short term sell signal and possibly an intermediate term sell signal.

Euro:

The December euro gained 25 points on low volume of 142,966 contracts. Total open interest declined by 6773 contracts, which relative to volume is approximately 80% above average, meaning that liquidation was fairly heavy on the modest advance. The euro made a high of 1.3526 on November 4 and as this report is being compiled on November 5, the euro has made a high of 1.3524. The high made through November 5 as of this writing has held since the opening of the evening session on Sunday November 3.

We recommend the initiation of bearish positions on November 5, and futures traders can exit short positions slightly above the high of 1.3526 made on November 3 and 4. On November 1, the December euro generated a short-term sell signal, but remains on an intermediate term buy signal.

Australian dollar:

The December Australian dollar rallied 72 points on lackluster volume of 54,021 contracts. Total open interest declined by 1,633 contracts, which relative to volume is approximately 20% above average, meaning that market participants were liquidating as the Australian dollar rallied.The market action in the Australian dollar has been consistently bearish ever since it generated a short and intermediate term buy signal in September. Additionally, managed money has been consistently short and have never turned bullish. Stand aside. The Australian dollar generated a short-term sell signal on November 1 and remains on an intermediate term buy signal.

S&P 500 E mini:

The S&P 500 E mini gained 8.25 points on extremely low volume of 1,007,197 contracts.Undoubtedly, volume on November 4 was one of the lowest non holiday volume days of 2013. On November 4, total open interest declined by 12,479 contracts, which relative to volume is approximately 45% less than average. We continue to recommend the initiation of long put protection for clients who hold long equity positions.