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Corn:

December corn closed unchanged on heavy volume of 449,268 contracts. Volume exceeded that of November 3 when the December contract advanced 4.00 cents on volume of 444,763 contracts and total open interest declined by 7,441. On November 4, total open interest declined again, this time by 2,757, which relative to volume is approximately 70% below average. The December contract accounted for loss of 19,416 of open interest.

As this report is being compiled on November 5, the December contract is trading 4.75 cents lower on the day and trading at session lows. The market does not have the momentum to make daily lows above the 20 and 50 day moving averages and until this occurs, corn will likely trade in a sideways to lower pattern. December corn remains on short and intermediate term sell signals. We have no recommendation.

Chicago wheat:

December Chicago wheat advanced 9.75 cents on very heavy volume of 189,061 contracts.Volume was the strongest since August 27 when 187,854 contracts were traded and the December contract closed at 4.89 3/4. On November 4, total open interest increased by 2,838 contracts, which relative to volume is approximately 40% below average, but a total open interest increase on yesterday’s price advance is bullish. Additionally, the December contract lost 1,445 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in December and increase total open interest.

The open interest increase on November 4 follows the total open interest increase on November 3 of 3,119 contracts when the December contract gained 8.50 cents. According to the most recent COT report, managed money was short by ratio of 1.49:1 and the past two days activity show that new buying is powering the market higher, not shorts covering positions. However, as we have pointed out before, the December contract has been unable to generate an intermediate term buy signal, which would occur if the daily low is above OIA’s key pivot point for November 5 of 5.22 5/8.

Additionally, there is formidable resistance at the recent high of 5.30 3/4 made on November 4. Prior to November 4, the previous high occurred on October 7 at 5.31 1/2 and the high previous high to October 7 occurred on August 10 at 5.33 1/4.

In summary, Chicago wheat must break decisively above the highs of August 10 and October 7 and make DAILY LOWS above these highs to take another leg higher. December Chicago wheat remains on a short term buy signal, but an intermediate term sell signal. We have no recommendation.

Soybean complex: The soybean complex is trading sharply lower on November 5 and we will provide coverage on this in tomorrow’s report.

Live cattle: on November 5, December and February live cattle will generate short-term sell signals, which reverses the short term buy signal of October 19. Both contracts remain on intermediate term sell signals.

December live cattle lost the 3.00 cent daily limit on volume of 56,178 contracts. Total open interest declined just 17 contracts. The December contract accounted for loss of 2,253 of open interest, which means there were sufficient open interest increases in the forward months to offset most of the decline in December. However, the front month contracts were locked limit down from most of the session and this depressed volume. As this report is being compiled on November 5, the December contract is trading 2.85 cents lower and has made a daily low of 1.33625. We have no recommendation.

Cocoa:

December cocoa lost $62.00 on heavy volume of 59,824 contracts.Volume was the strongest since August 12 when 59,130 contracts were traded and the December contract closed at $3,052. On November 4, total open interest increased by 2,214 contracts, which relative to volume is approximately 35% above average meaning aggressive new short-sellers were entering the market and driving prices lower ($3,218). The December contract accounted for loss of 5,622 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in December and increase total open interest substantially. We consider the action on November 4 to be bearish. 

As this report is being compiled on November 5, the December contract is trading $5.00 higher and has made a daily low of $3,222, which is slightly above yesterday’s print. December cocoa remains on short and intermediate term buy signals. We have no recommendation.

Sugar #11:

March sugar lost 85 points on heavy volume of 198,101 contracts.Volume was the strongest since September 29 when 196,132 contracts were traded and the March contract closed at 12.46. On November 4, total open interest declined by a massive 12,885 contracts, which relative to volume is approximately 160% above average meaning liquidation was extremely heavy on yesterday’s large decline.

This is positive open interest action, and is in sharp contrast to the cocoa market when cocoa declined, and total open interest increased massively indicating short-sellers were in control. Liquidation when prices decline after a series of previous open interest increases is confirming bullish activity. As this report is being compiled on November 5, the March contract is trading 10 points higher and has made a daily low of 14.47, below yesterday’s print of 14.57. March sugar remains on short and intermediate term buy signals. We have no recommendation.

WTI crude oil:

December WTI crude oil lost $1.58 on volume of 730,194 contracts. Volume increased slightly from November 3 when the December contract gained $1.76 on volume of 712,774 contracts and total open interest increased by a disappointing 3,869. On November 4, total open interest declined by 3,739 contracts, which relative to volume is approximately 75% below average. The December contract accounted for loss of 22,315 of open interest, which indicates that there were sufficient open interest increases in the forward months to offset most of the decline in December.

As this report is being compiled on November 5, the December contract is trading 28 cents lower and has made a daily low of $45.55, which is the lowest print since 45.56 made on November 2. Looking at the chart, it appears that a head and shoulders pattern has formed on the daily chart, a negative chart formation, and though prices have not broken sharply yet, the first sign of trouble will be if the December contract makes a daily high below OIA’s pivot point for November 5 of $45.61, which would confirm the downtrend has accelerated. For the December contract to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point for November 5 of $47.28. We have no recommendation.

Gold: On November 4, December and February gold generated an intermediate term sell signals after generating a short-term sell signal on October 30.

December gold lost $7.90 on volume of 173,910 contracts. Total open interest increased by 2,482 contracts, which relative to volume is approximately 40% below average, but a total open interest increase on yesterday’s price decline is bearish and confirms the downtrend. Short-sellers were entering the market and driving prices to a new low for the move of $1105.60. As this report is being compiled on November 5, the December contract is trading nearly unchanged after making a new low for the move of 1103.60. We have no recommendation.

Dollar index:

The December dollar index advanced 78.6 points on volume of 30,842 contracts. Total open interest exploded higher, increasing by 1,968 contracts, which relative to volume is approximately 145% above average meaning aggressive new buyers were entering the market in large numbers and driving prices to a new high for the move of 98.150.

Yesterday’s strong open interest increase on the sharp advance follows the November 3 advance of 24 points when total open interest increased by 1,119 contracts on volume of 19,722. In summary, the dollar index is being powered higher by new buying, which is a distinct change from the previous couple of weeks.

As this report is being compiled on November 5, the December contract is trading 13.1 points higher and has made a new high for the move of 98.240.We see continued advances in the dollar index especially because the British pound is likely to generate a short-term sell signal tomorrow and the Japanese yen is going to generate an intermediate term sell signal on November 5.

In summary, the currencies that comprise the dollar index will be on short and intermediate term sell signals, which will power the dollar index higher. The dollar index generated a short-term buy signal on October 23 and an intermediate term buy signal on October 26.We have no recommendation.

Euro:

The December euro lost 1.05 cents on volume of 258,156 contracts. Total open interest increased by a sizable 11,003 contracts, which relative to volume is approximately 65% above average meaning aggressive new short-sellers were entering the market in large numbers and driving prices to a new low for the move of 1.0849, which is the lowest print since 1.0837 made on July 21.

As this report is being compiled on November 5, the December contract is trading 14 pips higher after making another new low of 1.0839. The December euro remains on short and intermediate term sell signals and we expect the euro to continue to move lower. However, tomorrow is the employment report and if the numbers come in weaker than expected, we could see a sharp rally in the euro and a pullback in the dollar index. We have no recommendation at this juncture.

British pound:

The December British pound lost 57 pips on light volume of 69,629 contracts. Total open interest increased by 2,902 contracts, which relative to volume is approximately 60% above average meaning aggressive new short-sellers were entering the market in substantial numbers and driving prices lower (1.5356).

As this report is being compiled on November 5, the December contract is trading sharply lower, down 1.65, or -1.07% on dovish comments made by Mark Carney the Chancellor of the exchequer of the United Kingdom, which reduces the probabilities of an interest rate increase by the British Central Bank.

Although the December pound will not generate a short-term sell signal on November 5, it is likely tomorrow, but this will depend upon the results of the US employment report. For a short-term sell signal to be generated, which would reverse the short-term buy signal of October 15, the high of the day must be below OIA’s key pivot point for November 5 of 1.5280. We have no recommendation.

Yen: The Japanese yen will generate an intermediate term sell signal on November 5 after generating a short-term sell signal on October 23.

The December yen lost 35 pips on volume of 137,128 contracts. Total open interest increased by an astounding 13,029 contracts, which relative to volume is approximately 300% above average. This confirms that market participants are becoming increasingly bearish on the yen, which has been a relative out performer among the G-7 currencies. As this report is being compiled on November 5, the December contract is trading 12 pips lower on the day. We have no recommendation.

10 Year Treasury Note: On November 4, the December 10 year treasury note generated an intermediate term sell signal after generating a short-term sell signal on October 29.

The December 10 year note lost 6 points on volume of 1,388,831 contracts. Total open interest declined by a sizable 54,333 contracts, which relative to volume is approximately 30% above average meaning liquidation was substantial on the decline. Ever since the 10 year note generated a short-term sell signal on October 29, the market has headed south without its usual counter trend rally. The market is massively oversold, and tomorrow’s employment report may give the 10 year note a reasonable chance to rally. We have no recommendation.