This report will be truncated due to the government closure.

Soybeans:

November soybeans declined 21.25 cents on volume of 261,209 contracts. Volume shrank approximately 20,000 contracts from October 10 when soybeans lost 0.25 cents and open interest increased 6,777 contracts. On October 11, total open interest increased by 8,274 contracts, which relative to volume is approximately 25% above average meaning that new shorts were entering the market and driving prices lower. However, it didn’t take much of an increase of open interest to drive prices down to the July lows. The November contract lost 5,027 contracts of open interest, which makes the total open interest increase much more impressive (bearish). As this report is being compiled on October 14, November soybeans are trading 6.25 cents higher and have made a daily high of $12.80. Soybeans remain on a short-term sell signal, but an intermediate term buy signal. We would wait for further rally before contemplating the initiation of new bearish positions.

Soybean meal:

December soybean meal lost $6.20 on volume of 73,620 contracts. Total open interest increased by 1,075 contracts, which relative to volume is approximately 40% less than average. However, the October contract lost 255 and December lost 5,428 of open interest, which makes the total open interest increase much more impressive (bearish). October 11 was the second day in a row that open interest increased on a price decline. On October 10, December soybean meal generated a short-term sell signal, but remains on an intermediate term buy signal. As this report is being compiled on October 14, December soybean meal is trading $3.90 higher. Although we are more bearish on soybeans, bears looking to initiate positions should wait for a rally before considering implementing them.

 Corn:

December corn lost 5.00 cents on low volume of 153,169 contracts. Total open interest increased by 3,063 contracts, which relative to volume is approximately 20% below average. The December contract lost 3,733 of open interest, which makes the total open interest increase more impressive (bearish). As this report is being compiled on October 14, December corn is trading 1.25 cents higher. The market is massively oversold and though corn fundamentals are bearish, we feel uncomfortable recommending bearish positions at current levels. 

Wheat:

December Chicago wheat advanced 6.75 cents on volume of 79,627 contracts. Total open interest increased by 3,451 contracts, which relative to volume is approximately 70% above average meaning that longs were extremely aggressive in their initiation of new positions and were able to drive Chicago wheat prices higher. The open interest increase on October 11 was the largest since October 7 when open interest increased by 4,385 contracts on volume of 72,982 contracts. December Kansas City wheat advanced 4.75 cents on volume of 20,610 contracts while open interest increased by a massive 1,239 contracts, which relative to volume is approximately 140% above average, meaning that new longs were entering the market aggressively and pushing prices higher.

As we have pointed out in previous reports, the open interest increases in both Chicago and KC are positive, but our concern is this has not pushed prices to new highs. We think there is significant trade selling keeping a lid on prices. For December Chicago wheat to continue its move higher, it must close above its 200 day moving average on the continuation chart of $6.97 3/8. The 200 day moving average on the December chart is 7.16 3/8. Kansas City wheat must close above its 200 day moving average of 7.86 1/4 and has already decisively moved above the 200 day moving average on the continuation chart of 7.45. We continue to think that Chicago and Kansas City wheat is in a corrective mode, and recommend a stand aside posture on new positions until such time the market retests the low of 7.49 in KC and 6.82 1/4 for Chicago wheat and see if this support holds.

Cotton:

December cotton gained 20 points on volume of 15,101 contracts. Total open interest declined by 322 contracts, which relative to volume is approximately 20% less than average. Cotton remains on a short and intermediate term sell signal, and we advise waiting for a rally before initiating new bearish positions.

Live cattle:

December live cattle advanced 30 points on volume of 46,654 contracts. Volume was the highest since October 1 when 48,172 contracts were traded and open interest increased by 327 contracts while December cattle lost 71/2 points. On October 11, total open interest increased by a massive 2,650 contracts, which relative to volume is approximately 120% above average meaning that new longs were aggressively entering the market and pushing prices fractionally higher. The October contract lost 1,693 of open interest, which makes the total open interest increase much more impressive (bullish). As this report is being compiled on October 14, December cattle has made another new high at 1.33175. We recommend that clients stand aside and wait for correction.

Crude oil:

November crude oil lost 99 cents on extremely heavy volume of 801,524 contracts. Volume was the highest since July 19, 2013 when 801,653 contracts were traded and November crude oil closed at $104.35. On October 11, total open interest declined only 5,163 contracts, which relative to volume is approximately 65% less than average. The November contract lost 28,861 of open interest, which means there were open interest increases in the forward months, which brought down total open interest. November crude made a new low for the move at $100.60, which is the lowest price since early July. Continue to hold bearish positions and if short futures, lower the exit point from $104.38 originally recommended on October 2 to one based upon sound money management principles. Continue to hold the short call position recommended in the September 30 report.

Natural gas:

November natural gas advanced 5.3 cents on volume of 352,075 contracts. Total open interest increased by 8,484 contracts, which relative to volume is average. The November contract accounted for loss of 11,382 of open interest, which makes the total open interest increase much more impressive. October 11, was the second day in a row that open interest increased along with price. The open interest increases have been relatively modest, which indicates that market participants are not overly enthusiastic about natural gas at this juncture. 

As we stated in the October 13 Weekend Wrap, “For the November contract to generate an intermediate term buy signal, the daily low must be above $3.779. If this occurs, we would recommend that short options positions be liquidated.  It is likely the market will pull back once the intermediate term buy signal is generated, especially if natural gas does not pull back prior to this.”

As this report is being compiled on October 14, natural gas has made a high for the move at $3.855 and is trading 4.2 cents higher. The low for the day has been 3.758, which is approximately 2 cents below the pivot point intermediate buy signal. However, the market is trading in a very firm manner, and looks to close higher on the day. Despite the positive performance, November natural gas has not taken out the high of $3.892 made on September 19. Although, the market will likely pull back due to its overbought condition, we think there may be a better opportunity on the long side once this occurs. As such, we recommend liquidating the short call position and move to the sidelines while awaiting a correction.

Euro:

The December euro advanced 19 points on volume of 156,608 contracts. Total open interest increased by 4,277 contracts, which relative to volume is average. As this report is being compiled on October 14, the December euro is trading 15 points higher and has made a high for the day of 1.3602. The euro remains on a short and intermediate term buy signal.

Australian dollar:

The December Australian dollar advanced 11 points on light volume of 59,431 contracts. Total open interest declined by 1,542 contracts, which relative to volume is average. As this report is being compiled on October 14, the December Australian dollar is trading 25 points higher and has made a daily high of 94.69, which is 7 ticks shy of the high of 94.76 made on September 18. The Australian dollar generated a short and intermediate term buy signal on September 5 and September 18 respectively. Without the data from the COT reports, we have no idea what extent managed money is long or short. This makes it more difficult to assess the strength of the current move.

S&P 500 E mini:

The S&P 500 E mini gained 14.00 points on relatively light volume of 1,562,532 contracts. Total open interest declined by 4,974 contracts, which is minuscule and dramatically below average. However, the fact that open interest declined at all is very negative. Please see the October 13 Weekend Wrap when we discussed the market dynamics in greater detail. As it stands, during October 10 and 11, the E mini advanced 50.25 points and open interest declined by 27,234 contracts. This is extremely negative, and we continue to advise the initiation of long put protection if this has not been done already. As this report is being compiled on October 14, the E mini is trading 1.25 points higher and has made a daily high of 1705.50 on very low volume.