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Corn:

December corn advanced 12.75 cents on volume of 446,760 contracts. Total open interest declined by 1,878 contracts, which relative to volume is approximately 65% below average. The September contract lost 1,350 of open interest, December -9,644, March -1,046, July 2016 -397, which means there was liquidation in the near months as prices rocketed higher on Friday. Additionally, there were insufficient increases of open interest in the forward months to offset the decline in the 4 delivery months.

As this report is being compiled on September 14, the December contract is trading 5.50 cents higher and has made a daily high is 3.93 3/4, which is the highest print since August 12 (3.93 1/2). It appears certain that December corn will generate a short-term buy signal on September 14, which means that the low of the day must be above OIA’s key pivot point for September 14 of 3.80 3/4.

Additionally, December wheat is getting close to generating a short-term buy signal and the key pivot point for September 14 for the generation of a short-term buy signal is $5.00 3/4, and the daily low must be above the pivot point. December Chicago wheat is currently the star performer on September 14 trading 3.14% higher versus December corn +1.68%.

As we stated in the weekend report, the total decline of open interest is negative, but this does not mean the market cannot continue to move higher, especially if speculative shorts begin panicking. However, we are expecting a setback, perhaps a sharp one now that December corn has generated a short-term buy signal. Usually, after the generation of a short-term buy signal, markets have a tendency to pull back from 1-3 days. Do not chase the market at current levels. 

Sugar: On September 11, October 2015 sugar generated a short-term buy signal, but not the March 2016 contract. The October contract remains on an intermediate term sell signal.

October sugar advanced 33 points on huge volume of 329,621 contracts. Total open interest declined by 1,311, which relative to volume is approximately 80% below average, but the pattern of total open interest declines on advances in the October contract continues. The October contract lost 34,637 of open interest, and though this was whittled down substantially when total open interest was compiled, the fact remains that short covering has been powering sugar higher, not new buying.

Additionally, managed money remains substantially net short the market and the March 2016 contract has been unable to generate a short-term buy signal. We recommend a stand aside posture while keeping a lookout for opportunities to initiate bearish positions once short-sellers have been blown out sufficiently.

Cocoa:

December cocoa lost $22.00 on volume of 20,190 contracts. Total open interest increased by 747 contracts, which relative to volume is approximately 20% above average meaning new short-sellers were driving prices lower, not liquidation of previously held long positions. However, the December contract lost 313 of open interest, and this may indicate that cocoa prices are ready for a correction. Since generating short and intermediate term buy signals on September 8, cocoa has closed lower just once (September 11). Continue to stand aside and wait for a further correction before considering bullish positions.

Dollar index:

The December dollar index lost 25.3 points on volume of 72,567 contracts. Total open interest declined by 446 contracts, which relative to volume is approximately 55% below average. As this report is being compiled on September 14 the December contract is trading unchanged on the day. The December dollar index remains on short and intermediate term sell signals. Stand aside.

Euro:

The December euro gained 51 pips on volume of 338,144 contracts. Total open interest declined by a massive 12,869 contracts, which relative to volume is approximately 30% above average meaning liquidation was extremely heavy on Friday’s advance. This is not surprising considering that leverage funds added to their net short position in the most recent COT report and the December contract made a new high for the move of 1.1368, which has been taken out on September 14 (1.1391). The December euro remains on short and intermediate term by signals. Stand aside.

British pound:

The December British pound lost 41 pips on volume of 104,513 contracts. Total open interest increased by 3,120 contracts, which relative to volume is approximately 5% above average meaning that new short-sellers were entering the market and driving prices lower. As this report is being compiled on September 14, the December Pound is trading near unchanged on the day and has made a daily high of 1.5463, which is slightly above Friday’s print of 1.5455.

In order for the pound to continue to advance, the December contract must make a daily low above OIA’s pivot point of 1.5462. The downtrend will resume if the December contract makes a daily high below OIA’s pivot point of 1.5340. The December contract remains on short and intermediate term sell signals. Stand aside.

Yen: There will be no report for the yen for September 14, The December contract remains on short and intermediate term by signals.

WTI crude oil:

October WTI crude oil lost $1.29 on volume of 771,009 contracts. Volume fell from September 10 when the October contract gained $1.77 on volume of 960,852 contracts and total open interest increased just 111. On September 11, total open interest increased by a sizable 10,134 contracts, which relative to volume is approximately 40% below average, but Friday’s total open interest increase on the price decline is clearly bearish.

The action of the past two days indicates there is little enthusiasm for the upside and much enthusiasm by short-sellers for the downside. Additionally, the November Brent contract remains on short and intermediate term sell signals and hasn’t gotten close to generating a short-term buy signal.

As this report is being compiled on September 14, the October contract is trading 55 cents lower and is made a daily low of 43.59, which is the lowest print since 43.36 made on September 10, which is slightly above the previous low print of 43.21 made on September 2. The November Brent contract is trading 1.75 lower on September 14. 

For the October WTI contract to generate a short term sell signal, the high of the day must be below OIA’s key pivot point  for September 14 of 43.24. The rally will resume if the daily low is above OIA’s pivot point for September 14 of $45.38. October WTI remains on a short term buy signal, but an intermediate term sell signal. Stand aside.

S&P 500 E-mini: OIA recommends the initiation of a long at the money option straddles in the October 2015 contract.

The September S&P 500 E-mini gained 10.75 points on volume of 2,556,975 contracts. Total open interest increased by a substantial 75,083 contracts, which relative to volume is approximately 20% below average. As this report is being compiled on September 14, the December E-mini is trading 10.25 points lower after making a daily high of 1964.25.

We are recommending  Long At The Money option straddles in the October 2015 E-mini and this position can be carried into Thursday’s announcement by the Federal Reserve. The profit either on the upside or downside. Additionally volatility has been declining which means that option prices are far more reasonable than they would have been just one week ago.

Keep in mind  this option is good for 30 days, which means that the time value is going to begin eroding at a rapid pace, therefore it is not a position that you want to retain for much more than a couple of days. The logic behind the straddle is that the market is likely to move substantially one way or the other and clients can profit in either direction.