November soybeans lost 4.75 and January lost 6.25 cents on very light volume of 121,706 contracts. Total open interest declined by 3,282 contracts, which relative to volume is average. The front months all lost open interest with November -2290, January -2228, March -2196. As we have pointed out in previous posts, we have yet to see a build in open interest when prices decline. This tells us soybeans remain in the liquidation stage, and that market participants have not gotten sufficiently bearish to enter new shorts at current levels. January soybeans made a new low for the move at $12.47, which is the lowest price since August 15 (12.43 3/4). Soybeans are likely to trade in a narrow range with lackluster volume until the release of the November 8 report by the USDA. January soybeans generated a short-term sell signal on September 30 and an intermediate term sell signal on November 1. Stand aside.
December soybean meal lost $4.10 on volume of 58,665 contracts. Total open interest declined by 1,065 contracts, which relative to volume is approximately 25% less than average. December Soybean meal made a new low at $391.80, which takes soybean meal back to the lows of August 19 (389.00). Like the rest of the grain complex, we expect soybean meal to trade in a narrow range until the USDA report is released on November 8. Stand aside.
December corn lost 1.25 cents on heavier than normal volume of 327,050 contracts. Volume increased approximately 31,000 contracts from November 4 when December corn lost 1 cent and open interest increased by 13,859 contracts. On November 5, total open interest declined by 7,356 contracts, which relative to volume is approximately 10% below average. The December contract accounted for loss of 23,465 of open interest, and there were open interest increases in the forward months which brought down total open interest to a below average number. As this report is being compiled on November 6, December corn is trading 3.00 cents lower and has made a new low for the move at $4.20 3/4,, which is the lowest price on the continuation chart since August 2010. The market continues to move incrementally lower, with increases of open interest. On November 8, we see two possible scenarios: The market breaks sharply lower, and closes near the lows. Alternatively, a rally ensues because the market has for the most part discounted the worst case. Everyone is bearish corn because of the terrible fundamentals, and whenever there is a universal opinion about a market, it is likely to move in the opposite direction, at least temporarily. Corn remains on a short and intermediate term sell signal. Stand aside.
December Chicago wheat lost 6.75 cents on volume of 93,708 contracts. Total open interest increased by a hefty 6,667 contracts, which relative to volume is approximately 185% above average meaning that new shorts were aggressively entering the market and driving prices lower. The December 2013 through May 2015 contracts all added open interest. During the past 2 trading sessions beginning on November 4, open interest has increased as prices have declined. This indicates that market participants are getting increasingly bearish on Chicago wheat, and though we think the move lower has further to go, it is the first real sign that bullish psychology in wheat has changed.
Kansas City wheat lost 7.00 cents on heavy volume of 23,262 contracts. Volume was the heaviest since November 1 when 24,871 contracts were traded and total open interest declined by 1,252 contracts. On November 5, total open interest declined by 1,162 contracts, which relative to volume is approximately 100% above average meaning that liquidation was extremely heavy. The December contract accounted for loss of 2,845 of open interest and the March 2014 through March 2015 contracts all had open interest increases. For the past 3 days beginning on November 1, open interest has declined by a total of 3,882 contracts while Kansas City wheat has declined 18.25 cents. Kansas City wheat was massively overbought, especially from an open interest standpoint with the latest COT report tabulated on October 22 showing a long to short ratio of 7.17:1.
As this report is being compiled on November 6, December Chicago wheat is trading 3.25 cents lower and has made a new low for the move at 6.52 1/4 while December KC wheat is trading 5.50 lower and has made a new low for the move at $7.16 3/4. On November 1, December Chicago wheat generated a short and intermediate term sell signal and December KC wheat generated a short-term sell signal, but remains on an intermediate term buy signal. Despite the recent terrific performance of wheat, especially Kansas City wheat, the 50 day moving average in December Kansas City wheat remains below its 150 day moving average: 50 day $7.28 7/8, 150 day 7.43 3/4 and this is true for December Chicago wheat as well. This tells us that wheat has more backing and filling to do before the 50 day moving average is able to climb above 150 day average.
December cotton lost 1 point on heavy volume of 31,366 contracts. Volume was the highest since October 31 when 39,513 contracts were traded and open interest increased by 1,263 contracts and December cotton lost 66 points. On November 5, total open interest increased by 595 contracts, which relative to volume is approximately 25% less than average. December cotton was sharply lower most of the day and made a new low at 75.27, and then rallied to close nearly unchanged. November 5, was the 14th consecutive day that December cotton closed lower. As this report is being compiled on November 6, December cotton is trading 1.45 cents higher and has made a high of 78.94.
In the past couple of reports, we have cautioned clients the market is massively oversold and is overdue for a short covering rally. The rally may continue through Thursday when market participants will begin squaring their positions prior to November 8 report. For those clients who are short cotton, buy stops should be in place based upon sound money management principles. Even with the rally, the market remains oversold relative to its 50 day moving average of 82.89 and the 20 day moving average of 80.34. Cotton has a distinct seasonal tendency to bottom in November and rally through the rest of the 4th quarter. The bottom in November of 2012 occurred on November 8 when December cotton made a low of 74.35.
December live cattle lost 5 points on volume of 47,394 contracts. Total open interest declined by 656 contracts, which relative to volume is approximately 40% below average. The December contract lost 6,032 of open interest and February 2014 through February 2015 contracts all gained open interest, which brought down the total open interest declined to a minor number. From October 30 through November 5, cattle has experienced a series of lower highs and lower lows. Although the decline has been gradual, we think cattle should generate a short-term sell signal within the next day or two. Until we receive the October 29 COT report, we will not know the extent to which managed money has liquidated long positions. Stand aside.
December crude oil lost $1.25 on light volume of 486,615 contracts. Total open interest declined by 6,016 contracts, which relative to volume is approximately 45% less than average. The December contract lost 10,038 of open interest. December crude oil made a new low for the move at $93.07, which is the lowest price since June 2013. Crude oil is massively oversold and is overdue for a good-sized technical bounce, which could take December crude up to the 20 day moving average of 98.54. As this report is being compiled on November 6, December crude is trading $1.76 higher and has made a daily high of $95.24. Continue to hold short call positions recommended on September 29.
The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.6 million barrels from the previous week. At 385.4 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 3.8 million barrels last week and are in the upper half of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories decreased by 4.9 million barrels last week and are at the lower limit of the average range for this time of year. Propane/propylene inventories fell 2.7 million barrels last week and are in the lower half of the average range. Total commercial petroleum inventories decreased by 8.4 million barrels last week.
December natural gas advanced 2.1 cents on heavy volume of 341,127 contracts. Volume was the highest since October 22 when 374,803 contracts were traded and December natural gas lost 8.7 cents while open interest declined 7,075 contracts. The December contract accounted for loss of 2,015 of open interest. December natural gas made a new low for the move the $3.379, which is the lowest price since mid August 2013. As this report is being compiled on November 6, December natural gas is trading 4.2 cents higher and the rest the petroleum complex is trading higher as well. December natural gas remains on a short and intermediate term sell signal. No position has been recommended. Stand aside.
January platinum lost $6.20 on light volume of 6109 contracts. Total open interest increased by 64 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on November 6, January platinum is trading $15.10 higher and has made a daily high of 1469.90, which is shy of the high of 1472.50 made on October 31. Both gold and silver are trading higher and we suspect this is due to the decline in the dollar index. As we have noted before, our concern is when the dollar index resumes its advance,which will likely negatively impact platinum. Despite this, we like how platinum has traded ever since it generated a short and intermediate term buy signal on October 29. Although, we would not recommend new long positions at this juncture due to the rally, for those who are long at lower levels, it would be wise to move sell stops close to your entry level. Keep in mind, the 50 day moving average on the continuation chart of 1449.30 is below its 150 day moving average of 1462.10 and the 200 day moving average of 1507.80. The moving averages on the January chart look pretty much the same. In short, the market is going to have to trade at a higher level consistently for the 50 to cross decisively above the 150 and 200 day moving averages.
The December euro lost 43 points on light volume of 189,554 contracts. Total open interest declined by 642 contracts, which is minuscule and dramatically below average. The December euro made a new low for the move at 1.3450 on November 5, and as this report is being compiled on November 6, the euro has rallied 45 points and made a high of 1.3549, which is somewhat above the 50 day moving average of 1.3501. On November 5, we recommended that bearish positions be initiated and anyone short futures should use the November 4 high of 1.3526 to exit short positions. Although we think the market can rally up to the 1.3588 level, we think that will be the extent of the move. The euro generated a short-term sell signal on November 1, and as we said at the time, there tends to be a countertrend rally that lasts from 1-3 days. November 6 represents the 2nd day of the rally. A more conservative way to play the bearish position in the euro is to write out of the money calls.
TheDecember Australian dollar lost 14 points on volume of 88,697 contracts. Total open interest increased by 861 contracts, which relative to volume is approximately 50% less than average.The Australian dollar continues to act in a bearish fashion with respect to price and open interest. On November 1, it generated a short-term sell signal. Stand aside.
S&P 500 E mini:
The S&P 500 E mini lost 6.50 points on volume of 1,487,099 contracts. Open interest increased by 14,633 contracts, which relative to volume is approximately 50% less than average. It would be far more positive to see open interest decline when prices decline, but open interest action has been dicey ever since the rally began on October 10. As this report is being compiled on November 6 the December E mini is trading 8.75 points higher on low volume. We continue to advise long put protection, especially for those clients who hold on equity positions.