The COT report that was tabulated for October 15 and just released by the CFTC will be provided in the October 20 Weekend Wrap over the weekend.

Soybeans:

November soybeans lost 7.25 and January lost 10.25 cents on volume of 173,724 contracts. Volume declined approximately 31,000 contracts from October 30 when November soybeans advanced 8.50 and January gained 5.75 cents and open interest declined 12,736 contracts. On October 31, total open interest declined by 6,180 contracts, which relative to volume is approximately 40% above average meaning that liquidation was fairly heavy on the decline. The November contract accounted for loss of 7,502 of open interest. As we indicated in yesterday’s report, if January soybeans broke below $12.60 an intermediate sell signal would be generated. As this report is being compiled on November 1, January soybeans has made a low of 12.56 and is trading 7.50 cents lower. We been cautioning clients to be on the sidelines despite the extremely positive export sales numbers, and it appears that a good-sized washout of managed money longs is on the way. As of the October 15 tabulation date, managed money was long soybeans by a ratio of 8.77:1. The main driver for soybeans is going to be the upcoming USDA report on November 8. Stand aside.

 Soybean meal: On October 31, December soybean meal generated a short-term sell signal, but remains on an intermediate term buy signal.

December soybean meal lost $8.20 on heavy volume of 102,114 contracts. Volume was the highest since September 12 when 125,136 contracts were traded and December soybean meal closed at $447.20. On October 31, open interest declined by 6,826 contracts, which relative to volume is approximately 160% above average meaning that liquidation was very heavy as soybean meal declined to a new low of $403.00. The December contract accounted for loss of 10,371 of open interest. Like soybeans, soybean meal exports have been impressive, but the market is likely looking ahead to the November 8 report. As we reported previously, soybean meal has been the weak sister of the soybean complex. For example on November 1, December soybean meal is trading 1.83 percent lower while January soybeans are trading 0.69% lower. Usually after the generation of a sell signal, there is a rally that can last from 1-3 days. Since the November 8 report will be released next Friday, we caution clients against holding positions into the November 8 report.

Corn:

December corn lost 2.00 cents on extremely heavy volume of 431,081 contracts. Volume was the highest since August 26 when 445,229 contracts were traded and December corn closed at $5.00 1/2. On October 31, open interest increased by 6,494 contracts, which relative to volume is approximately 40% below average, but continues the pattern of open interest increasing on declines. The December contract lost 14,882 of open interest, which makes the total open interest increase more impressive (bearish). As this report is being compiled on November 1, December corn is trading 1.25 cents lower and has made a new low for the move the $4.25 3/4. As we’ve said before, corn can continue to move lower, but we do not think it is wise being short at current levels, especially since managed money has probably increased their net short position. This makes corn vulnerable to a sharp short covering rally, especially if the November 8 report provides a surprise. Stand aside.

Wheat:

December Chicago wheat lost 7.50 cents on heavy volume of 138,402 contracts. Volume was the heaviest since August 13 when 151,531 contracts were traded and December Chicago wheat closed at $6.41 1/2. On October 31, total open interest declined by 5,939 contracts, which relative to volume is approximately 65% above average, meaning that liquidation was extremely heavy on the decline into new low territory at 6.67. December Kansas City wheat lost 7.25 cents on fairly light volume of 18,930 contracts. Total open interest increased by 52 contracts and the December contract lost 2,056 of open interest.

In yesterday’s report, we discussed that total open interest in KC wheat has been increasing on the decline while open interest in the December contract has been declining. As an indication of the bullishness in Kansas City wheat, consider that  per October 15 COT tabulation date, managed money was long Kansas City wheat by a ratio of 6.05:1, which was up from the October 8 COT report of 4.29:1 and the October 1 COT report of 2.73:1. Contrast this with the COT report for Chicago wheat showing managed money long by a ratio of 1.25:1. In short, managed money is nearly 5 x as long in Kansas City wheat as they are in Chicago wheat. This disparity is unhealthy, and we may begin to see outperformance by Chicago wheat compared to KC. It is possible that Chicago wheat may generate a short and/or intermediate term sell signal on November 1. Continue to stand aside.

Cotton:

December cotton lost 66 points on heavy volume of 39,513 contracts. Volume exceeded the number of contracts traded on October 7 of 39,380 when  December cotton declined 3.16 cents and open interest declined 2,155 contracts. On October 31, total open interest increased by 1,263 contracts, which relative to volume is approximately 25% above average. As we indicated in yesterday’s report, we see more liquidation ahead by longs who are holding positions from higher levels. The COT report, which was tabulated on October 15 showed that managed money was long cotton by a ratio of 4.75:1, which was a reduction from the previous week of 6.30:1. As this report is being compiled on November 1, December cotton is trading 22 points lower and has made another new low for the move at 76.54. Remarkably, cotton has declined every day since October 18 when we recommended that clients initiate short positions and use the high of October 18 of 84.40 as an exit point. It should be noted, the market never got near to 84.40 after October 18. Those holding short positions should take care to have buy stops in place because the market is likely to rally at any time. It is massively oversold.

Live cattle:

December live cattle lost 40 points on volume of 56,545 contracts. Total open interest increased by 3,877 contracts, which relative to volume is approximately 170% above average meaning that new shorts were entering the market aggressively and driving prices lower. The October contract lost 85 of open interest and December -2581. On October 30, open interest increased by 1,802 contracts on volume of 64,246 contracts when December cattle lost 1.15 cents. This is bearish. As this report is being compiled on November 1, December cattle is trading 32 1/2 points lower and has made a new low for the move at 1.31950. We been cautioning clients to stand aside and wait for correction because the market is massively overbought from an open interest point of view, and to a lesser degree on price. The COT report tabulated on October 15 showed that managed money was long cattle by a ratio of 3.85:1, which is up from the previous week of 3.22:1 and the ratio of 2 weeks prior of 2.78:1. We can only imagine how much higher the ratio is going to be in the October 29 tabulation. Stand aside.

Crude oil:

December crude oil lost 39 cents on volume of 570,357 contracts. Total open interest declined by 2,108 contracts, which relative to volume is approximately 85% below average. Although in yesterday’s report we stated that crude oil was overdue for a short-term rally, the market continues to sink lower and make new lows for the move. On November 1, December crude oil is trading $1.37 lower and has made a new low for the move at 94.66. Continue to hold short call positions recommended on September 29.

Natural gas:

December natural gas lost 3.9 cents on volume of 254,492 contracts. Total open interest increased by 8,491 contracts, which relative to volume is approximately 30% above average. For the past 3 days beginning on October 29, natural gas prices have declined by 8 cents while open interest has increased 30,518 contracts. This is bearish open interest action relative to the price decline. On October 23, OIA announced that natural gas had generated a short-term sell signal and had already been on an intermediate term sell signal. As this report is being compiled on November 1, December natural gas is trading 5.5 cents lower and has made a new low for the move at $3.508. We have recommended a stand aside posture despite the short-term sell signal.

The Energy Information Administration announced on October 31 that working gas in storage was 3,779 Bcf as of Friday, October 25, 2013, according to EIA estimates. This represents a net increase of 38 Bcf from the previous week. Stocks were 120 Bcf less than last year at this time and 58 Bcf above the 5-year average of 3,721 Bcf. In the East Region, stocks were 91 Bcf below the 5-year average following net injections of 17 Bcf. Stocks in the Producing Region were 102 Bcf above the 5-year average of 1,161 Bcf after a net injection of 18 Bcf. Stocks in the West Region were 48 Bcf above the 5-year average after a net addition of 3 Bcf. At 3,779 Bcf, total working gas is within the 5-year historical range.

Platinum:

January platinum lost $31.50 on light volume of 9,411 contracts. Open interest declined by 1,128 contracts, which relative to volume is approximately 280% above average, meaning that liquidation was extremely heavy on the decline, which is positive. Another positive for platinum on October 31 was the light volume on the decline. To put this in perspective, the average daily volume during the month of October was 9,660 and for September was 17,067 contracts, while the year to date average daily volume is 13,125 contracts. In our view, this shows that platinum is in strong hands and according to our October 15 tabulation of the COT report, managed money was long platinum by a ratio of 2.78:1, which is down from October 8 of 2.90:1 and the October 1 COT report when managed money was long by a ratio of 3.90:1.

Interestingly, from October 12 through October 30 when January platinum advanced $104.30, open interest declined by 2,633 contracts. Normally, this would be considered bearish open interest action relative to the price advance, however, platinum has generated a short and intermediate term buy signal, which tells us that platinum has the wherewithal to move higher. There is a negative zeitgeist with respect to the precious metals complex, and it is going to take some time before speculators realize the market is in a transition phase from bear to bull. As this report is being compiled on November 1, January platinum is trading $4.20 higher and has made a low of $1445.80, which is only slightly below the low of October 31 of 1446.70. This is occurring when gold is trading $10.20 lower and silver is trading 2.5 cents lower. The platinum gold spread continues to widen on November 1, which serves to underscore the underlying strength in platinum. We are hesitant to recommend bullish positions prior to the weekend, but the performance of platinum on November 1 is outstanding considering the sharply higher dollar.

Gold:

December gold lost $25.60 on volume of 159,352 contracts. Total open interest declined only 1,508 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on November 1, December gold is trading $11.50 lower and has made a new low for the move at 1305.60. Gold remains on a short and intermediate term sell signal.

Silver:

December silver lost $1.116 on volume of 56,411 contracts. Total open interest declined 452 contracts, which relative to volume is approximately 60% below average. As this report is being compiled on November 1, December silver is trading 3.2 cents lower and has made a low of $21.705 which is only slightly below the low made on October 30 of 21.730. Silver remains on a short and intermediate term sell signal.

Euro:

The December euro lost 1.36 cents on heavy volume of 288,052 contracts. Volume was the highest since September 12 when 300,442 contracts were traded and the December euro closed at 1.3308. On October 31, total open interest declined by a massive 12,350 contracts, which relative to volume is approximately 70% above average, meaning that liquidation was extremely heavy on the decline, which is positive considering the massive open interest build during the extended rally. According to the COT report tabulated on October 15, managed money was long the euro by a ratio of 3.16:1, which was down from the October 8 report of 3.61:1. As this report is being compiled on November 1, the December euro is trading 96 points lower and has made a new low for the move at 1.3480, which is very close to its 50 day moving average.We were warning the euro was massively overbought and was due for a good-sized correction. In this space of 3 days beginning on October 29, the euro has declined 2.15 cents. Stand aside.

Australian dollar:

The Australian dollar lost 7 points on surprisingly heavy volume of 98,249 contracts.Volume was the highest since October 23 when 99,607 contracts were traded and the Australian dollar made a high for the move of 97.25, but reversed during the day and closed 86 points lower. Interestingly, on October 31, the Australian dollar did not break through its low of 94.12 made on October 30, but as this report is being compiled on November 1, the Aussie has made a new low for the move at 93.95 and is trading 25 points lower.The December Australian dollar remains on a short and intermediate term buy signal.

S&P 500 E mini:

The S&P 500 E mini declined by 9.50 points on heavier than normal volume of 1,902,047 contracts.Volume was the highest since October 10 when 2,295,217 contracts were traded and the December E mini closed at 1685.00.We continue to advise the initiation of long put protection for those clients who hold long equity positions.