Daily reports will be truncated until such time that government operations resume.

Soybeans:

November soybeans advanced 6.25 cents on volume of 203,691 contracts. Open interest increased by 6,041 contracts, which relative to volume is approximately 20% above average meaning that new longs were entering the market at a healthy pace and driving prices higher. The November contract lost 3,538 of open interest, which makes the total open interest increase more impressive. November soybeans made a new low for the move at $12.61 3/4 and as this report is being compiled on October 15, soybeans are trading 1.75 cents lower, but they have not taken out yesterday’s low. Though soybeans have been trading in a bearish fashion, remarkably they have not generated an intermediate term sell signal. November beans generated a short-term sell signal on September 30, but the decline since the sell signal has been modest. We advise against shorting soybeans at current levels and would wait for a rally. Once the government shutdown ends, we think it would be wise to move to the sidelines.

Soybean meal:

December soybean meal advanced $4.00 on very light volume of 48,943 contracts. Total open interest increased by 1,111, which relative to volume is approximately 10% below average. The October and December contracts lost a total of 325 of open interest. We much prefer the short side of soybeans to soybean meal, but would wait for a rally before considering bearish positions. As this report is being compiled on October 15, December soybean meal is trading $4.50 lower and has made a new low for the move at $400.70.

Corn:

December corn advanced 3.75 cents on volume of 131,982 contracts. Total open interest increased by 5,768 contracts, which relative to volume is approximately 70% above average meaning that new longs were aggressively entering the market and driving prices higher. The December contract lost 1,813 of open interest, which makes the total open interest increase more impressive. As this report is being compiled on October 15, December corn is trading 4.75 cents higher and has made a daily high of $4.44, which is below $4.46 1/2 made on October 10. We advise against shorting the market at current levels, and believe it is only a matter of time before corn has a decent short covering rally.

Wheat:

December Chicago wheat advanced 0.25 cents on very light volume of 45,189 contracts. Volume was the lowest since September 18 when 35,396 contracts were traded and December wheat closed at $6.461/2. Total open interest increased by 565 contracts, which relative to volume is approximately 45% below average. Total volume in Kansas City wheat was 11,160 contracts, which is the lowest volume since September 17 when 11,132 contracts were traded and December KC wheat closed at $6.901/4. On October 14, total open interest increased by 159 contracts, which relative to volume is approximately 40% below average. December Chicago wheat made a high of $6.96 1/2, which is 3.25 cents below the high for the move of 6.99 3/4 made on October 8. Kansas City wheat made a high of $7.64, which is 0.75 cents below the high of $7.64 3/4 made on October 3. Since October 3, both Chicago and Kansas City wheat have been trading in sideways patterns. However, total open interest in this time frame increased by 8,779 contracts in Chicago wheat and 4,864 contracts in Kansas City wheat. In short, the increase of open interest from October 3 through October 14 is not moving prices higher. As we pointed out in the October 8 report, the heavy increase of open interest is not moving prices to new highs.

From the October 8 report:

“During the past 3 trading sessions beginning on October 7, total open interest in KC wheat has increased by 2,749 contracts while Kansas City wheat prices have advanced 8.75 cents. While this is bullish open interest action relative to the price advance, our concern is that it is taking massive increases of open interest to move the market a bit more than 1%. This tells us there is substantial commercial selling, which is acting to keep a lid on prices. On October 3, KC wheat topped out at $7.64 3/4 and from October 3 through October 9, open interest has increased by 2,581 contracts, yet the October 3 high has not been taken out. Again, this is confirmation of heavy selling keeping the advance in check.”

Both Chicago and Kansas City wheat are on short and intermediate term buy signals, but they are in a corrective mode. For 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 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. We look for a test of 7.49 in KC and 6.82 1/4 for Chicago wheat.

Cotton:

December cotton advanced 24 points on very light volume of 9,345 contracts. Volume was the lightest since September 23 when 6,400 contracts were traded and December cotton closed at 84.27. On October 14, total open interest declined by a massive 995 contracts, which relative to volume is approximately 195% above average, meaning that liquidation was extremely heavy on a very modest advance. This is bearish open interest action relative to the price advance. Additionally, the decline of open interest on October 14 was the largest since October 9 when it declined 1,622 contracts.

On October 8, December cotton generated a short and intermediate term sell signal, but the market has not had a countertrend rally, which would enable clients to initiate bearish positions. The market looks weak, and we see cotton headed to the 82.43 area, which was the low on August 30 and 82.00, the low on May 31. After this, there is no support until the November 8, 2012 low of 74.35. December cotton should encounter resistance at the 50, 150 and 200 day moving averages of 85.78, 85.63 and 84.39 respectively.

Live cattle:

December live cattle advanced 67 1/2 points on surprisingly light total volume of 34,522 contracts. Volume declined approximately 12,000 contracts from October 11 when December cattle advanced 30 points on volume of 46,654 contracts and open interest increased by 2,650 contracts. On October 14, total open interest increased by 3,665 contracts, which relative to volume is approximately 190% above average meaning that new longs were aggressively entering the market and pushing prices higher, but overall participation in the rally was low as evidenced by shrinking volume on October 14. The October contract lost 1,051 of open interest, which is about to expire, but this makes the total open interest increase much more impressive. December cattle made a new high for the move at 133200, which is the highest price on the continuation chart since January 8, 2013. On September 23, December cattle generated a short-term buy signal, which confirmed the intermediate term buy signal. Though we are bullish on cattle, the market is massively overbought from a price and open interest point of view. We recommend a stand aside posture until such time that cattle has a correction near to the 1.30000 area, which is the 50 day moving average

WTI Crude Oil:

November crude oil advanced 39 cents on volume of 440,033 contracts. Volume shrank dramatically from October 11 when 801,524 contracts were traded and open interest declined by 5,163 contracts while November crude oil lost 99 cents. Additionally, volume was the lowest since October 4 when 365,043 contracts were traded and open interest increased by 5,923 contracts while November crude oil advanced 53 cents. On October 14, total open interest declined by 6,526 contracts, which relative to volume is approximately 40% less than average. The November contract lost 9,153 of open interest. On September 23, crude oil generated a short-term sell signal, but has not as of October 15 generated an intermediate term sell signal. Continue to hold bearish positions and if short futures, lower the exit point from $104.38 originally recommended on October 2 to 102.62, the high made on October 11. Continue to hold the short call position recommended in the September 30 report.

Natural gas:

 November natural gas advanced 4.4 cents on light volume of 262,507 contracts. Volume was the lowest since October 4 when 185,865 contracts were traded and natural gas closed essentially unchanged on the day while open interest increased by 2,334 contracts. On October 14, open interest increased by a massive 15,547 contracts, which relative to volume is approximately 140% above average, meaning that new longs were aggressively entering the market and driving prices higher. The market made a new high for the move at $3.855, and as this report is being compiled on October 15, 3.855 also is the high for the day. The massive increase of open interest is an indication that late comers got on board at the top of the move. Often, a massive increase of open interest and/or volume signifies a top or temporary top. As this report is being compiled on October 15, natural gas is trading 2.3 cents lower, but is rather firm considering that crude oil is sharply lower and the major stock indices are trading lower as well. However, November natural gas has not tested the September 19 high of $3.892. Since generating the short-term buy signal on October 10, natural gas has not had a correction, which would allow clients to initiate bullish positions. Continue to wait for correction. Natural gas will not generate an intermediate term buy signal on October 15.

Euro:

The December euro advanced 23 points on very light volume of 96,098 contracts. Total open interest increased by a massive 5,740 contracts, which relative to volume is approximately 140% above average meaning that market participants were very aggressive initiating new long positions, but could only move the market fractionally higher. The euro remains on a short and intermediate term buy signal, but we advise a stand aside posture at this juncture.

Australian dollar:

The Australian dollar advanced 10 points on very light volume of 42,034 contracts.Total open interest increased by 986 contracts, which relative to volume is approximately 10% below average. As this report is being compiled on October 15, the Australian dollar has made a new high for the move of 95.10, which takes out the previous high of 93.76 made on September 18. On September 5, the December Australian dollar generated a short-term buy signal and an intermediate term buy signal on September 18. Due to the government closure, we have no access to the COT reports, which would provide a picture of the extent to which managed money is net long or short the Australian dollar. At this juncture, we recommend a stand aside posture.

S&P 500 E mini:

The S&P 500 E mini advanced 5.25 points on fairly light volume of 1,514,133 contracts.Total open interest advanced only 3,576 contracts, which relative to volume is approximately 80% less than average. The open interest action on October 14 continues the consistent negative pattern that began on October 2. From October 10 through October 14, the E mini advance 45.00 points, but open interest declined 23,658 contracts. This is extremely negative, and as a result, we continue to advise long put protection, especially for those clients who hold long equity positions. For more information on the analysis of the E mini, please see the October 13 Weekend Wrap.