The October 29 COT report was released yesterday, and we will incorporate the results of it into today’s report. We willl post the entire results in the November 3 Weekend Wrap.

Soybeans:

November soybeans gained 3.75 and January advanced 4.75 cents on extremely light volume of 102,884 contracts. Total open interest increased by 2,775 contracts, which relative to volume is average. The November contract lost 1,232 of open interest. The USDA released its export sales report for the week ending October 31 and 1018.4 thousand tons were sold, which brings total commitments to 1.221 billion bushels versus the USDA projection for the entire season of 1.370 bb. This is the best export pace since 2007-2008. The COT report tabulated on October 29 showed that managed money remains long soybeans by a ratio of 6.52:1, which is a large number considering the magnitude of the recent decline. As this report is being compiled on November 7, November beans are trading 21.00 cents higher and January +14.25. Soybeans remain on a short and intermediate term sell signal, and we strongly suggest that clients liquidate any open positions and move to the sidelines prior to the USDA report on November 8.

Soybean meal:

December soybean meal advanced $4.00 on very light volume of 46,156 contracts. Total open interest increased by 1,834 contracts, which relative to volume is approximately 55% above average, meaning that new longs were entering the market fairly aggressively and pushing prices higher. The December contract lost 1,013 of open interest, which makes the total open interest increase more impressive (bullish). The COT report showed that managed money is long soybean meal by a ratio of 3.95:1, which is fairly high considering the magnitude of the recent decline. The USDA reported another good export sales number of 803.05 thousand tons, which brings total commitments to 4961.58 thousand tons versus USDA projections of 8618 thousand tons. The export pace exceeds that of the 2012- 2013 season, which is the best since at least 2008-2009. As this report is being compiled on November 7, January soybean meal is trading $12.70 higher. Soybean meal remains on a short-term sell signal and an intermediate term buy signal. Stand aside until after the report is released on November 8. Any open position should be liquidated prior to the report.

Corn:

December corn lost 3.75 cents on very heavy volume of 373,653 contracts. Volume was the heaviest since October 31 when 431,081 contracts were traded and December corn lost 2.00 cents while open interest increased by 6,494 contracts. On November 7, total open interest increased by 18,496 contracts, which relative to volume is approximately 100% above average meaning that new shorts were aggressively entering the market and driving prices lower. Corn made a new low for the move at $4.20 3/4. The USDA reported that export sales totaled 1718.6 thousand tons and total commitments as of October 31 are 876 million bushels versus the USDA projection for the entire season of 1.225 billion bushels.

Although exports are healthy, there is going to be a large amount of surplus product to sell. As of the October 29 COT report, managed money short by a ratio of 1.37:1, which is the highest ratio that we’ve seen in reports thus far. Since the compilation of the October 29 report, open interest has increased by 30,295 contracts through November 6 as corn prices have drifted lower. There is a high probability that the short to long ratio of corn is going to be higher in the November 5 report, which will be released tomorrow. We strongly advise that clients liquidate positions prior to the report and move to the sidelines.

Wheat: On November 6, December Kansas City wheat generated an intermediate term sell signal and generated a short term sell signal on November 1.

December Chicago wheat lost 2.75 cents on heavy volume of 105,130 contracts. Volume increased approximately 7,000 contracts from November 5 when December wheat lost 6.75 cents and total open interest increased 6,667 contracts. On November 5, total open interest increased by a massive 8,249 contracts, which relative to volume is approximately 210% above average meaning that new shorts were extremely aggressive about entering positions. The December contract lost 2,644 of open interest, which makes the total open interest increase much more impressive (bearish). December wheat made a new low for the move the $6.52 1/4, and this has not been taken out on November 7. Export sales for all wheat categories were healthy at 416.8 thousand tons and total commitments as of October 31 are 768.2 million bushels versus the USDA projection for the entire season which ends May 31, 2014 at 1.100 billion bushels. 70% of the current crop has been committed for the rest of the season and the export pace is the best since the 2007-2008 season.

December Kansas City wheat lost 5.75 cents on fairly heavy volume of 22,947 contracts. Volume declined by approximately 300 contracts from November 5 when KC wheat declined 7.00 cents and total open interest declined by 11,162 contracts. On November 6, total open interest declined 1,440 contracts, which relative to volume is approximately 140% above average, meaning that liquidation was heavy. The December contract lost 2,482 of open interest. For the past 4 trading days beginning on November 1, open interest has declined each day and totals 5,322 contracts. This is healthy open interest action relative to the price decline, and we have been concerned about the refusal of market participants to liquidate as the market was moving lower prior to November 1. The October 29 COT report was very revealing in that it showed managed money long Chicago wheat by a ratio of 1.16:1, but they were long by a ratio of 8.25:1 in KC wheat.  we will have a better idea about the extent of liquidation once we see the November 5 COT report tomorrow. We think that we will see higher wheat prices later in the season, but for now the market is in a liquidation mode.

Cotton:

December cotton advanced 1.13 cents on very heavy volume of 40,560 contracts. Volume was the largest since June 17 when 63,177 contracts were traded. On November 6, total open interest increased only 58 contracts, and the December contract lost 2,895 of open interest while the March 2014 through December 2014 contracts all gained open interest. As this report is being compiled on November 7, December cotton is trading 32 points lower. We suggest that clients consider covering all or part of their bearish positions in advance of the November 8 report. As we pointed out in yesterday’s report, cotton has a very distinct seasonal tendency to bottom in November and rally through the 4th quarter. Additionally, according to the October 29 COT report, the long to short ratio has been pared back significantly and now stands at 1.63:1, which is down dramatically from the October 22 report of 3.88:1. On October 8, the long to short ratio stood at 6.30:1. As a result, a considerable amount of selling pressure has been relieved, which will make it easier for new buyers to move prices higher.

Live cattle:

December live cattle lost 2.5 points on volume of 44,813 contracts. Total open interest increased by 616 contracts, which relative to volume is approximately 45% less than average. The December contract lost 4,906 contracts of open interest, which makes the total open interest increase much more impressive (bearish). We were amazed to see the October 29 COT report reveal that managed money is long cattle by ratio of 4.84:1, which is above the October 22 report of 4.21:1 and the October 15 report of 3.85:1. In short, managed money as of October 29 is as bullish as they have ever been since we began reporting on cattle after it generated a short term buy signal on September 23. We have been encouraging clients to stand aside because the market has been trading in a sideways to lower pattern, and with managed money heavily long cattle, this will add selling pressure as the market moves lower. As this report is being compiled on November 7, December cattle is trading 32.5 points lower and has made a new low for the move at 1.31600, We think cattle will break the October 18 low of 131450. As we have been saying for the past couple of sessions, we think it is inevitable cattle will generate a short-term sell signal and it would occur if December cattle closes below 1.31650.

Crude oil:

December crude oil advanced $1.43 on volume of 594,883 contracts. Total open interest declined by 7,611 contracts, which relative to volume is approximately 45% below average. The December contract accounted for loss of 27,055 of open interest. The decline of open interest on the rather modest advance is bearish and the COT report tabulated on October 29 shows that managed money remains long crude oil by a ratio of 5.81:1, which is down slightly from the report tabulated on October 22 of 6.17:1 and the October 15 report of 6.04:1. In short, managed money is stubbornly holding onto long positions and refusing to liquidate even as prices move to June 2013 lows. From October 16 through October 29, crude oil declined $3.38, but the long to short ratio of managed money barely budged. The heavy number of managed money longs will act to keep a lid on rallies because those long at higher levels will be selling when the market rallies to recoup some of their losses. Maintain the short call position recommended on September 29.

Natural gas:

December natural gas advanced 3.2 cents on volumeof 277,575 contracts. Total open interest increased by 1,861 contracts, which relative to volume is approximately 60% below average.The December contract lost 3,286 of open interest. On November 7, as this report is being compiled December natural gas is trading 3.4 cents higher and has made a new high for the move at 3.622. Natural gas remains on a short and intermediate term sell signal. The October 29 COT report showed that managed money is short natural gas by a ratio of 1.08:1, which is a major turnaround from October 22 when they were long by a ratio of 1.06:1. Stand aside.

 The Energy Information Administration announced that working gas in storage was 3,814 Bcf as of Friday, November 1, 2013, according to EIA estimates. This represents a net increase of 35 Bcf from the previous week. Stocks were 112 Bcf less than last year at this time and 57 Bcf above the 5-year average of 3,757 Bcf. In the East Region, stocks were 98 Bcf below the 5-year average following net injections of 10 Bcf. Stocks in the Producing Region were 111 Bcf above the 5-year average of 1,174 Bcf after a net injection of 22 Bcf. Stocks in the West Region were 44 Bcf above the 5-year average after a net addition of 3 Bcf. At 3,814 Bcf, total working gas is within the 5-year historical range.

Platinum:

January platinum advanced $17.40 on light volume of 7,295 contracts. Total open interest increased by 418 contracts, which relative to volume is approximately 120% above average meaning that new longs were aggressively entering the market and moving platinum prices higher. Since November 1, platinum has seen a series of higher highs and higher lows,which bodes well for a continued move higher. As this report is being compiled on November 7, January platinum is trading $11.90 lower and has made a low of 1453.50, which is respectable considering that the dollar index is sharply higher and that equity markets are tanking and petroleum prices are lower as well. Even gold and silver, which have been far weaker than platinum are both trading less than 1% lower on the day.We been cautioning clients about the likelihood of a continued move higher in the dollar index, and a corresponding decline in the euro, which comprises approximately 57% of the weight of the dollar index. For clients who entered long positions at lower levels, maintain a stop near your entry point. If you are stopped out, there is always an opportunity to get back in the market, but if there is a major turn in the equity market and the dollar index continues to move higher, we could see a negative price reaction in platinum. The COT report of October 29 showed that managed money is long platinum by a ratio of 5.54:1, which is up from the report of October 22 of 3.36:1. Platinum generated a short and intermediate term buy signal on October 29.

Euro:

The December euro advanced 47 points on light volume of 185,784 contracts. Total open interest declined by 4,323 contracts, which relative to volume is approximately 10% below average, but is negative action against a price advance. On November 1, OIA announced that the December euro had generated a short-term sell signal, but remained on an intermediate term buy signal. As this report is being compiled on November 7, the December euro is trading 91 points lower and has made a new low for the move at 1.3294 on extremely heavy volume. For clients who decided to write out of the money calls or who purchased puts, stay with those positions. For futures traders, stand aside. According to the October 29 COT report, managed money is long the euro by a ratio of 3.04:1, which is down slightly from the ratio on October 22 of 3.18:1 and 3.16:1 on October 15. In short, there is going to be heavy selling pressure from disillusioned longs who are on the wrong side of the market.

From the November 5 report:

On November 5, we recommended that bearish positions be initiated and anyone short futures should use the November 4 high of 1.3526 to exit short positions. Although we think the market can rally up to the 1.3588 level, we think that will be the extent of the move. The euro generated a short-term sell signal on November 1, and as we said at the time, there tends to be a countertrend rally that lasts from 1-3 days. November 6 represents the 2nd day of the rally. A more conservative way to play the bearish position in the euro is to write out of the money calls.

Australian dollar:

The Australian dollar advanced 41 points on light volume of 57,112 contracts. Total open interest declined by 101 contracts, which is minuscule and dramatically below average. As this report is being compiled on November 7, the Australian dollar is trading 78 points lower on heavy volume and has made a daily low of 94.23. On November 1, the December Australian dollar generated a short-term sell signal, but remains on an intermediate term buy signal. According to the October 29 COT report, managed money remains short by a ratio of 1.55:1, which is about the same as the October 22 report of 1.50:1 but slightly below the ratio of the October 15 report of 1.70:1.

S&P 500 E mini:

TheS&P 500 E mini gained 9.00 points on lackluster volume of 1,324,786 contracts.Total open interest declined by 887 contracts, which is minuscule, but is a very negative reading because open interest should have increased on a price advance. We continue to see a pattern of tepid increases or open interest declines when the E mini advances, and open interest increases when prices decline. This is bearish. As this report is being compiled on November 7, the E mini is trading 19.25 points lower on heavy volume. Long put protection should be in place.