Soybeans:

November soybeans advanced 16.75 cents on volume of 259,028 contracts. Volume was approximately 22,000 contracts higher than October 16 when November beans advanced 9.50 cents and open interest increased by 11,546 contracts. On October 18, total open interest increased by 950 contracts, which is minuscule and dramatically below average. The November contract accounted for loss of 9,688 of open interest and accounted for loss of 7832 contracts on October 16. The tepid increase of total open interest is a negative considering the magnitude of the advance and that soybeans reached their highest level since October 10 when they made a high of 13.02. There are numerous rumors that export sales number to be released by the USDA are going to be blockbusters and that sales for the entire season are dramatically above last year’s pace, which was a record. As we have pointed out in previous reports, soybeans tend bottom on a seasonal basis in October and then rally through the 4th quarter. We recommend a stand aside posture until the USDA releases export reports. Additionally, the USDA announced that the October 11 WASDE report will be released November 8. Soybeans remain on a short-term sell signal and an intermediate term buy signal.

Soybean meal:

December soybean meal advanced $9.20 on volume of 82,401 contracts. Total open interest increased by a massive 5,782 contracts, which relative to volume is approximately 185% above average meaning that new longs were aggressively entering the market and driving prices higher. Note the difference in the open interest increases of soybeans versus soybean meal. One is very positive and the other negative. Soybean meal remains on a short-term sell signal and an intermediate term buy signal.

Corn:

December corn advanced 0.25 cents on volume of 182,846 contracts. Total open interest declined by 107 contracts, which is minuscule and dramatically below average. We do not envision much movement in corn until the USDA releases its export reports. Stand aside.

Wheat:

December Chicago wheat advanced 4.50 cents on volume of 80,992 contracts. Total open interest increased by 161 contracts, which relative to volume is minuscule and dramatically below average. The December contract lost 705 of open interest and March 164. As this report is being compiled on October 18, December wheat is trading 17.50 cents higher and has taken out the old high of $6.99 3/4 made on October 8 and has made another new high of $7.06 1/2. Kansas City wheat advanced 4.25 cents on light volume of 15,044 contracts while open interest increased by 117 contracts, which relative to volume is approximately is 60% below average. As this report is being compiled on October 18, December KC wheat has taken out the October 3 high of 7.64 3/4 and is trading 18.00 cents higher and has made a new high for the move at $7.70. It appears that both Chicago and KC wheat are anticipating blockbuster export sales reports, but until these are released, it is risky to be in the market. From an open interest point of view, Chicago wheat is the much better buy due to the massive decline of open interest on October 15 and 16. KC open interest did not decline during October 15 and 16 when prices declined. We recommend a stand aside posture until the release of the export reports.

Cotton:

December cotton advanced 66 points on volume of 17,881 contracts. Volume increased over October 16 when 16,026 contracts were traded and open interest increased 299 contracts while December cotton lost 55 points. Additionally, volume was the highest since October 9 when 22,831 contracts were traded. On October 17, total open interest increased by 437 contracts, which relative to volume is average. Yesterday was the first day that open interest increased when prices declined. On October 17, cotton prices were trading lower most of the day and made a new low for the move at 82.57. The market then rallied into the close, which we attribute to short covering. As this report is being compiled on October 18, December cotton is trading 77 points lower and has made a low of 82.83. However, the most important aspect of trading on October 18 is that the market made a high of 84.40, which is the highest price for December cotton since October 8 when the high was 84.75. The high made on October 18 occurred during the early morning hours, and the market has traded lower ever since. Like the grain complex, we suggest that clients stand aside until such time the USDA releases its export reports.

Live cattle:

December live cattle declined 1.475 cents on huge volume of 75,383 contracts. Volume was the largest since August 8 when 84,660 contracts were traded and cattle closed 1.650 cents higher. On October 17, open interest surprisingly increased by 2,841 contracts, which relative to volume is approximately 50% above average meaning that new shorts were aggressively entering the market and driving prices dramatically lower. The October contract lost 1,788 of open interest and December -1,583, which makes the total open interest increase much more impressive (bearish). In the upcoming weekend report, we will provide an analysis of open interest during the time that cattle  rallied and show how the open interest build on October 17 is bearish in the short-term. Do not enter long positions at this juncture.

Crude oil:

December crude oil lost $1.62 on huge volume of 873,513 contracts. Volume was the highest since July 11 when 934,688 contracts were traded and December crude oil closed 37 cents lower at $100.33. On October 17, total open interest declined by 15,532 contracts, which relative to volume is approximately 25% below average. The November contract accounted for loss of 29,684 of open interest. On October 17, December crude oil made a new low for the move at $100.21, and as this report is being compiled on October 18, December crude is trading 36 cents higher. Continue to hold short call positions.

Natural gas:

November natural gas lost 1.2 cents on volume of 271,102 contracts. Total open interest declined by 2,186 contracts, which relative to volume is approximately 60% below average. The November contract accounted for loss of 19,025 of open interest. The market made a new low for the move the $3.727, and as this report is being compiled on October 18, the daily low has been $3.685. We told clients that we expected a correction down to the $3.67 area, and it will be instructive to see whether open interest declines on October 18. Beginning on October 15 through October 17, open interest has declined a total of 16,637 contracts, which wiped out the total open interest increase on October 14 of 15,547 contracts. On October 10 and 11 open interest increased by a total of 14,705 contracts. October 10 was the first day that open interest increased on the rally. As this report is being compiled on October 18, natural gas is trading unchanged on the day. From a price and open interest standpoint, the natural gas market appears to be well-balanced. This means the market is not overbought based upon the open interest increase during the rally, nor is it based upon price when considering the 50 day moving average is $3.65.

Euro:

The December euro advanced 1.44 cents on heavy volume of 242,883 contracts. Volume exceeded trading on September 13 when 240,766 contracts were traded and the December euro advanced 2 points. The highest most recent volume occurred on September 11 when the December euro advanced 42 points on volume of 329,886 contracts and open interest increased by 8,620. On October 17, open interest increased by 13,753 contracts, which relative to volume is approximately 120% above average meaning that massive numbers of new longs entered the market and drove prices higher, however, overall participation was tepid as evidenced by lackluster volume. As this report is being compiled on October 18, the December euro is trading 3 points higher and has made a new high for the move at 1.3707. The euro is trading at the highest level since early February, and the highest point for 2013. The euro is overbought and since it is trading at the highest level of this year and beyond that back to November 2011, the market is vulnerable to a healthy correction. The December euro remains on a short and intermediate term buy signal.

Australian dollar:

The Australian dollar advanced 82 points on volume of 78,154 contracts. Volume was the highest since October 10 when 87,143 contracts were traded and the December Australian dollar advanced 13 points while open interest increased by 5,307 contracts. On October 17, total open interest declined by only 16 contracts. Considering the magnitude of the move and the fact that the Australian dollar moved into new high territory, the decline of open interest confirms there is not much conviction about the Aussie moving higher. The Australian dollar is trading at levels last seen in June 2013. For the past 2 days beginning on October 16, the Australian dollar has advanced 1.30 cents while open interest has increased by a total of only 169 contracts. On September 5, OIA announced that the Australian dollar generated a short-term buy signal, which was confirmed by the intermediate term buy signal generated on September 18. The Aussie dollar is overbought and with new market participants reluctant to initiate new long positions at current levels, it is vulnerable to a healthy correction.

S&P 500 E mini:

The December S&P 500 E mini advanced 14.50 points on volume of 1,671,076 contracts. Total open interest increased by 17,016 contracts, which relative to volume is approximately 50% below average. We continue to see a market that is moving higher, but doing so on low volume and with not much conviction as evidenced by the minor increases of open interest or declines of open interest on price advances. As this report is being compiled on October 18, the December S&P 500 E mini is trading 12.50 points higher on low volume and is making new highs for the day. It is been announced that the September employment report will be released this Tuesday October 22. With respect to long put protection, we think that everyone holding long equity positions should protect them with puts.