November soybeans lost. 40.75 cents on volume of 201,055 contracts. Volume declined by approximately 118,000 contracts from September 28 when soybeans advanced 30.25 and open interest declined by 1,669 contracts. On October 1, open interest increased by 753 contracts, which in relation to volume is 75% below average. It is remarkable that open interest increased on a significant move lower, and even more remarkable was that open interest in the November contract actually increased by 33 contracts. November soybeans closed at its lowest level since July 13, 2012 when November beans closed at $15.52 1/2. As mentioned in previous reports, longs continue to dig in their heels and are refusing to liquidate. As this report is being compiled on October 2, November beans are trading 21.25 lower, and at some point there is going to be some forced liquidation if the market continues to move lower. The next downside target is $15.08 and the 150 day moving average is approximately $15.00.
This week, there is pressure on prices because of the rapid pace of the harvest. According to the crop progress report released on Monday afternoon, 41% of the soybean crop has been harvested, versus expectations of 35%. However, the 41% pace is a record number for this time of year. Additionally, this is China’s Golden Week, and there is reduced, or negligible activity on the export front. Depending upon the movement of prices during the next couple of days, Friday, October 5 may be a window of opportunity to get long because at that point, at least 50% of the crop will have been harvested, the affect of the Chinese holiday will be discounted and the prospect of increasing yields will likely have been discounted as well. Additionally, the US employment report will be released and its effect will be discounted across all markets.
December soybean meal lost $12.40 on light volume of 57,239 contracts. Volume declined approximately 24,000 contracts from September 28, when the market advanced $13.00 and open interest declined by 1,123 contracts. On October 1, open interest declined by a massive 3,983 contracts, which in relation to volume is 180% above average. From September 17 through October 1, open interest has declined by 34,557 contracts while December soybean meal has declined by $50.90. During the same time frame, soybean open interest has declined by a total of 10,410 contracts while November soybeans declined by $1.78 3/4. The open interest action relative to price is acting extremely well for soybean meal, but not for soybeans. The COT report which will be tabulated on Tuesday, October 2, will probably show that the long to short ratio for managed money has declined again. Speculators should look to Friday, October 5 as a possible opportunity to get long.
December corn lost 0.50 cents on volume of 240,101 contracts. Open interest increased by 1,445 contracts, which in relation to volume is approximately 60% below average. The market action on October 1 was a major disappointment to all those who piled in on the rally of September 28, during which corn advanced the 40 cent daily limit. On that day, open interest increased by 26,547 contracts and the market’s performance on October 1 and October 2 may cause the new longs to liquidate. On September 11, December corn generated a short-term sell signal, but has not generated in intermediate term sell signal as of October 2. Stand aside
December wheat lost 18.25 cents on heavier than normal volume of 97,442 contracts. Volume declined approximately 67,000 contracts from September 28 when wheat advanced 47.00 cents and open interest increased by 4,294 contracts. On October 1, open interest increased by 2,805 contracts, which in relation to volume is average. The performance of wheat on October 1 was a major disappointment, and it lost nearly 40% of the previous day’s gains. Additionally, corn gave a stronger performance, but was unable to stem the decline in wheat. The open interest increase on the decline is another bearish indicator. On September 27, wheat generated a short-term sell signal, but as of October 2 has not generated in intermediate term sell signal. Stand aside.
November crude oil gained 29.00 cents on light or than normal volume of 392,478 contracts. Open interest increased by 3,086 contracts, which is approximately 80% less than average. There is no reason to be involved in crude oil at this juncture. November crude oil generated a short-term sell signal on September 20, but has not generated in intermediate term sell signal.
November heating oil lost 2.34 cents on volume of 139,691 contracts. Open interest increased by 1,646 contracts. There is no reason to be involved in heating oil, considering the erratic price and open interest action.
November gasoline closed unchanged on very light volume of 91,199 contracts. Open interest increased by 636 contracts. The market continues to look weak, and as this report is being compiled on October 2, November gasoline is trading 4.31 cents lower. Stand aside.
November natural gas gained 16.00 cents on volume of 567,798 contracts. Volume was the highest since September 11 when 666,980 contracts traded and natural gas closed at $2.992. On October 1, open interest increased by 14,405 contracts, which in relation to volume is average. On September 12, October natural gas generated a short and intermediate term buy signal. Our thinking has been the market will be range bound and likely will trade at $3.50 at the high-end and approximately $2.70 on the low. As of yesterday’s close, the market is at the highest level since December 8, 2011 when natural gas traded at $3.545. At this juncture, it is too late to get very bullish because at some point, hedge pressure from natural gas producers will kick in. This will put a lid on prices, which is why we believe the market will be range bound. Stand aside.
December copper advanced 2.75 cents on volume of 49,240 contracts. Open interest increased by 2,735 contracts, which in relation to volume is approximately 100% above average. Although copper generated a short-term buy signal on August 23, and an intermediate term buy signal on September 7, we do not believe it is wise to be long at this juncture. The Chinese economy continues to weaken as does the world economy and although there are risks on the long side, speculators should not trade copper from the short side either.
December gold advanced $12.20 on volume of 197,931 contracts. Open interest declined by 187 contracts. Gold made a new high for the move at $1794.40, but was unable to hold the gains, however, it closed at the highest level ($1783.30) since the beginning of the move. We continue to advise that speculators stand aside and wait for a correction because the market is overbought. Additionally, the open interest decline on the advance, indicates that gold is running out of steam at the high end of its trading range.
December silver gained 37.5 cents on volume of 60,691 contracts. Open interest increased by 2,835 contracts, which in relation to volume is approximately 80% above average. Like gold, speculators should stand aside and wait for silver to correct. A correction of approximately $2.00 would be healthy.
The December euro closed 34 points higher on volume of 282,200 contracts. Open interest increased by 4742 contracts, which in relation to volume is approximately 30% less than average. The price and open interest action continues to trade in a congruent fashion, which is bullish for the euro. Stand aside.
S&P 500 E mini:
The S&P 500 E mini gained 2.75 points on volume of 1,904,025 contracts. Open interest declined by 12,992 contracts, which in relation to volume is 75% less than average. Long put protection is strongly advised.