November soybeans lost 28.75 cents while January lost 25.50 on heavy volume of 311,737 contracts. Volume was the highest since September 12 when 320,575 contracts were traded and November soybeans advanced 37.75 while open interest increased 10,866 contracts. On October 28, open interest declined by 31,176 contracts, which relative to volume is approximately 195% above average meaning that massive liquidation was underway. The November contract accounted for loss of 37,738 of open interest. January soybeans made a low of 12.67, which is the lowest price for the January contract since October 14 when it reached $12.61 1/4. Although January soybeans remain on a short-term sell signal and an intermediate term buy signal, it won’t take much for an intermediate term sell signal to be generated. Stand aside.
December soybean meal lost $8.80 on heavy volume of 94,173 contracts. Volume was the highest since October 8 when 96,947 contracts were traded and December meal lost $5.80 well open interest declined 5323 contracts. On October 28, total open interest declined by 3135 contracts, which relative to volume is approximately 30% above average meaning that liquidation was fairly heavy on the decline and the high-volume showed a heavier than normal degree of participation. Clients should be on the sidelines after we recommended yesterday they close out any long call positions in the January or March contracts. Soybean meal remains on a short and intermediate term buy signal.
December corn lost 9.25 cents on heavy volume of 330,564 contracts. Volume exceeded that of September 30 when 320,558 contracts were traded and December corn lost 12.50 cents while open interest increased 12,957 contracts. On October 28, open interest increased by 14,394 contracts, which relative to volume is approximately 70% above average meaning that new shorts were aggressively entering the market and driving prices lower. There were open interest increases in the December 2013 through July 2015 contracts. Undoubtedly, speculators are heavily short corn, which makes us cautious at current levels even as corn has made a new low for the move on October 29 at $4.28 1/4. Although corn may certainly continue to drift lower, we do not think the risk at this juncture is worth the reward. Continue to stand aside.
December Chicago wheat lost 9.75 cents on volume of 64,799 contracts. Total open interest declined by 4188 contracts, which relative to volume is approximately 150% above average meaning that liquidation was heavy during the last 2 days December Chicago wheat has declined 15.50 cents while open interest has declined 12,519 contracts. This is healthy open interest declines in conjunction with the price decline in Chicago wheat. As this report is being compiled on October 29, December Chicago wheat has made a new low for the move at $6.76 1/4, which took out the low of $6.78 1/4 made on October 16. Kansas City wheat lost 8.25 cents on volume of 17,679 contracts. Total open interest declined by 3 contracts and the December contract lost 2372 of open interest. On October 29, as this report is being compiled, KC wheat has made a low of 7.49, which is slightly above the low of 7.49 a half made on October 18. We are advising clients remain on the sidelines until such time that Chicago and KC wheat give signs they have bottomed.
December cotton lost 43 points on volume of 22,840 contracts. Total open interest increased by 392 contracts, which relative to volume is approximately 25% less than average. The problem with cotton is that we have not seen liquidation by longs who initiated positions at much higher levels and as a result have losses, but they are refusing to liquidate. We continue to see cotton prices moving lower and advise clients who initiated short positions on our recommendation of October 18 to continue to hold these.
December live cattle advanced 82 1/2 points on volume of 45,089 contracts. Total open interest increased by 1668 contracts, which relative to volume is approximately 40% above average meaning that new longs were aggressively entering the market and moving prices higher. The October contract lost 405 and December lost 972 of open interest, which makes the total open interest increased more impressive. As this report is being compiled on October 29, cattle is trading 60 points higher but has not taken out the high of 1.34575 made on October 25. We are bullish cattle and definitely think the market can go higher, but we are concerned about the continual build of open interest without a meaningful correction. Keep in mind, that cattle prices are at their highest level in a year, which is going to impact consumption. Stand aside.
December crude oil advanced 83 cents on volume of 442,341 contracts. Total open interest declined by 836 contracts, which is minuscule and dramatically below average. The December and January contracts lost a total of 3077 of open interest. The decline of open interest on the modest rally is bearish and confirms the downtrend on September 23, OIA announced that crude oil generated a short-term sell signal and this was confirmed buy the intermediate term sell signal generated on October 21. As this report is being compiled on October 29, crude oil is trading 61 cents lower and has made a low of 97.82 on the day. Continue to hold short call positions that we recommended on September 29.
December natural gas lost 15.1 cents on volume of 297,930 contracts. Total open interest increased by 2894 contracts, which relative to volume is approximately 50% below average. The November contract accounted for loss of 12,442 of open interest, which makes the total open interest increase more impressive (bearish). As this report is being compiled on October 29, natural gas is trading 3.5 cents lower and has made a low for the day of $3.610, which is the lowest price for December natural gas since August 12 when it made a low of $3.590. On October 23, OIA announced that natural gas generated a short-term sell signal and had already been on an intermediate term sell signal. Our reluctance to recommend bearish positions is based upon the tendency of natural gas to flip from a short-term sell signal to a short-term buy signal.
December gold lost 30 cents on volume of 130,748 contracts. Total open interest increased by 976 contracts, which relative to volume is approximately 60% less than average. Gold made a new high for the move at 1361.80, which is the highest for December gold since mid-September. Gold has been struggling to generate a short and intermediate term buy signal, and although we think this is on the horizon, volume tells us that participation isn’t sufficient to drive prices higher at this juncture. We think gold needs the catalyst, and conceivably this may occur tomorrow when the Federal Reserve releases its decision about further quantitative easing. Another factor that may be hindering gold is that the euro looks like it is in the process of pulling back for a much-needed correction and this is causing a rally in the dollar index. If the decline in the euro continues, gold will likely perform in a sideways to lower pattern. Again, the key is going to be the announcement by the Federal Reserve on October 30.
December silver lost 10.1 cents on very light volume of 29,242 contracts. Total open interest declined by 293 contracts, which relative to volume is approximately 50% less than average. Like gold, silver needs the catalyst to move higher, the minutes of the Federal Reserve decision released on October 30, may be what the precious metals market needs to move out of the sideways to higher pattern.
January platinum will likely generate a short-term buy signal on October 29, but will not generate in intermediate term buy signal.
The December euro closed unchanged on light volume of 106,064 contracts. Total open interest declined by 1903 contracts, which relative to volume is approximately 25% less than average. As this report is being compiled on October 29, the December euro is trading 61 points lower and is made a low for the move at 1.3738 on heavy volume. There has been a massive build of open interest, and a pullback accompanied by a decline of open interest would be healthy for the market. The British pound also is declining on October 29 and is trading 1.21 cents lower. In short the dollar index is getting a boost from the major components that comprise the index and the yen is trading 1/2% lower as is the Swiss franc. Stand aside.
The Australian dollar lost 3 points on light volume of 53,606 contracts. Open interest increased by 380 contracts, which relative to volume is approximately 60% below average. As this report is being compiled on October 29, the December Australian dollar is trading 1.01 cents lower and has made a new low for the move at 94.43. We have been warning about a pullback in the Australian dollar and yesterday suggested that the pullback might extend to the 20 day moving average of 94.89. Since the December Australian dollar has already broken below its 20 day moving average, we think next support is from 93.07 to 93.94. It will be important to see how open interest performs relative to the price decline on October 29.
S&P 500 E mini:
The S&P 500 E mini gained 5.00 point on very low volume of 1,161,384 contracts. Total open interest increased by 5804 contracts, which relative to volume is approximately 75% less than average. For the past 3 days, volume continues to decline and has averaged 1,224,333 contracts. We have been cautioning clients about the loss the level of the markets and have advised that long put protection be in place, especially for those holding long equity positions.
Larry Fink of Blackrock warned on Bloomberg that the markets were getting excessively frothy:
- FINK SAYS IT’S “IMPERATIVE” THAT THE FED BEGIN TO TAPER
- FINK CALLS MARKET `OVER-ZEALOUS’
- FINK SAYS THERE ARE “REAL BUBBLE-LIKE MARKETS AGAIN”