November soybeans gained 25.25 cents on huge volume of 369,720 contracts. Volume was the highest since July 19 when 399,183 contracts were traded and November soybeans closed at $16.52 1/4. On October 11, open interest increased by 2,984 contracts, which in relation to volume is approximately 70% less than average. In other words, the increase of open interest was not significant. The November contract lost 14,128 contracts of open interest, but buying in the back months offset this decline. The market made a high of 15.68, but was unable to hold its gains and closed approximately 20 cents off the high. The minor increase in open interest and the poor closing is indicative of a market that is not ready to have a significant rally.
On October 12, the USDA released its export sales report and for the most recent week, 500,700 tons were sold for the 2012-2013 season and 23,000 tons were sold for the 2013-2014 season. Although export sales projections were for over 700,000 tons, the number that was reported isn’t all that disappointing considering the amount of the crop that has been sold, thus far and the season has a long way to go. According to the USDA report released on October 11, 68% of projected export sales of 1.265 billion bushels has already been sold, versus an average for this time of year of 41%. In other words, export sales are more than 50% ahead of last year’s pace. In yesterday’s report, we thought that November beans would pull back to the $15.32 area, but as this report is being compiled, the market has made a low of 15.10, which is 6 cents above the low made on October 3 of 15.04. It will take a couple of more days of trading before it can be determined whether the 15.04 low will hold. We believe that soybeans are near or at a harvest low. Soybeans remain on a short and intermediate term sell signal.
December soybean meal closed 9.60 higher on big volume of 92,772 contracts. Volume was the highest since September 20 when 97,147 contracts were traded and December meal closed at $483.10. On October 11, open interest increased by 1,183 contracts, which in relation to volume is approximately 50% less than average. The October contract lost 637 contracts of open interest and buying in December forward contracts was able to offset this. Export sales for soybean meal was 7,500 tons for the 2011-2012 season and 216,400 for the 2012 2013 season, which is a healthy number. Like soybeans, we think meal is very close to a harvest low, and a couple of more days of market action will likely support this.
December corn gained 36.50 cents on large volume of 398,255 contracts. Volume was the highest since August 10 when 457,645 contracts were traded and corn closed at 8.09 1/4. On October 11, open interest increased by an astounding 49,911 contracts. This is the largest open interest increase in recent memory. To put this increase in perspective, in relation to volume, the open interest increase was 485% above average. If the open interest increase had been average, approximately 9,950 contracts would have been added. Based upon our experience, we think that the speculative community was on the buy side and commercials were heavily on the sell side. The rally on October 11, has similar characteristics to the rally that occurred on September 28, when corn closed up the 40 cent limit on volume of 369,867 contracts, while open interest increased by 26,547 contracts. On September 28, corn made a high of $7.56 1/4 in the day session, and in the early evening hours of September 28, which is part of the October 1 report, corn advanced an additional 12 cents from the close earlier in the day, but it closed down 0.50 cents on October 1. The difference between the September 28 session, and the October 11-12 session is that on October 12, there was no follow through. Yesterday afternoon, December corn closed at $7.731/4, and the high thus far on October 12 is $7.72 3/4. On October 12, the USDA released its export sales report for corn and sales were dismal at 10,000 tons for the 2013-2014 season and 4,200 tons for the 2012-2013 season. It was expected that corn exports would total approximately 300,000 tons, and the latest number confirms that price is rationing demand. Stand aside.
December wheat closed 16.25 cents higher on volume of 115,489 contracts. Volume was the highest since September 28, when wheat advanced 47.00 cents on volume of 164,789 contracts and open interest increased by 4,294 contracts. On October 11, open interest increased by an astounding 13,575 contracts, which in relation to volume is 450% above average. If the open interest increase had been average, 2,887 contracts would have been added. As we compile this report on October 12, December wheat is trading 27.75 cents lower, therefore, any speculator that rushed in to buy on October 11 is showing losses on October 12. Export sales for the most recently reported week were disappointing at 279,900 tons for the 2012-2013 season. Stand aside.
November crude oil gained 82 cents on fairly heavy volume the 652,165 contracts. Open interest increased by 11,883 contracts, which in relation to volume is approximately 20% less than average. October 11 is the first day in the past several sessions that open interest and price acted in congruent fashion. We continue to believe that crude is headed lower and have advised that speculators purchase long put options on crude. Crude oil remains on a short and intermediate term sell signal.
November heating oil gained 4.40 cents on volume of 169,044 contracts. Open interest increased by 3,364 contracts, which in relation to volume is approximately 10% less than average. As we compile this report on October 12, November heating oil is down 4.30 after making a new high of $3.2668 on October 11. Stand aside.
November gasoline declined by.0037 cents on volume of 169,937 contracts. Open interest increased by 7,480 contracts, which in relation to volume is approximately 70% above average. As this report is being compiled on October 12, November gasoline is trading 7.97 cents lower. Stand aside.
November natural gas gained 12.9 cents on huge volume of 792,388 contracts. Open interest increased by 13,761 contracts, which in relation to volume is approximately 20% less than average. November natural gas made a new high for the move at 3.634. As we have indicated in prior reports, we believe that natural gas is in a trading range, and is at the upper end of the range. Stand aside.
December copper gained 3.35 cents on volume of 49,260 contracts. Open interest increased by a hefty 5,481 contracts, which in relation to volume is approximately 450% above average. This is a heavy increase of open interest, and we remain skeptical of the markets ability to move significantly higher. As this report is being compiled on October 12. December copper is trading 5.25 lower.
December gold advanced $5.50 on light volume of 122,915 contracts. Open interest increased by 3,412 contracts, which in relation to volume is a bit more than average. We have been advising that speculators stand aside until the market has had a chance to correct. As this report is being compiled on October 12, December gold is trading down $15.30. Gold needs to hold its September 26 low of 1738.30, or its next area support is $1720.
December silver closed 2.7 cents lower on volume of 38,628 contracts. Open interest increased by 1,240 contracts, which in relation to volume is approximately 20% above average. We have been warning our clients about the bearish implications of the open interest build during the decline and sideways movement of silver. As this report is being compiled on October 12, silver is trading 47.2 cents lower. We believe the market has further to go on the downside. Stand aside.
The December euro gained 33 points on volume of 223,780 contracts. Open interest declined by 626 contracts, which is a minuscule decline. On October 10, the December euro generated a short-term sell signal. Stand aside.
Apple Computer: On October 11, Apple Computer generated a short-term sell signal.
S&P 500 E mini:
The S&P 500 E mini gained 2.25 points on volume of 1,586,415 contracts. Open interest increased by 14,068 contracts, which in relation to volume is approximately 50% less than average. The market continues to act in a bearish fashion and speculators should definitely have long put protection in the S&P 500 E mini or another major index. The market may get a temporary bounce at the cash S&P 500 50 day moving average of 1427, or 1423 on the emini continuation chart.