For Bloomberg access:{OIAR<GO>}

Dollar index:

The September dollar index lost 18.3 points on volume of 50,134 contracts. Total open interest increased by 269 contracts, which relative to volume is approximately 75% below average, but Friday’s open interest increase on the price decline is bearish. This follows a well-worn pattern of total open interest advancing on price gains and increasing on declines. The September contract lost 92 of open interest.

As this report is being compiled on September 8, the September contract is trading 23.5 points lower and has made a daily low of 95.735, which is above Friday’s print of 95.660.The September and December dollar indices are on short and intermediate term sell signals, and for a short term buy signal to occur, the low of the day must be above OIA’s key pivot point for September 8 of 96.599. The dollar index will resume its downtrend if it makes a daily high below OIA’s key pivot point for September 8 of 95.709. We have no recommendation.

Euro:

The September euro advanced 33 pips on volume of 270,180 contracts. Total open interest declined by 1,223 contracts, which relative to volume is approximately 70% below average. The September contract lost 8,164 of open interest. The total open interest decline in Friday’s trading is bearish, and follows a recent pattern of open interest increases on price declines. For example, on September 2 & 3, the September contract declined by 56 and 123 pips respectively and total open interest increased by 1,556 and 9,040 respectively. This is bearish.

As this report is being compiled on September 8, the September contract is trading 27 pips above Friday’s close and has made a daily high of 1.1231, which is above Friday’s print of 1.12 00, but below Thursday’s print of 1.1245.The September and December Euro remains on short and intermediate term buy signals, and for a short term sell signal to occur, the high of the day must be below OIA’s key pivot point for September 8 of 1.1103. For the rally to resume, the low of the day must be above OIA’s key pivot point for September 8 of 1.1242.

It should be noted that the pivot point of 1.1242 is acting as a barrier to the September euro’s advance.The market has held steady despite the sharp declines/rallies in US equities, and at this juncture it is difficult to determine the immediate direction, but we think the bias is to the downside. With European quantitative easing and the mindset that goes with, we think it is only a matter of time before the euro rolls over and generates a short term sell signal. Obviously, much of this will depend upon the decision by the Federal Reserve in next week’s meeting. We have no recommendation.

British Pound:

The September British pound lost 72 pips on volume of 82,266 contracts. Total open interest increased by 2,092 contracts, which relative to volume is average. The September contract had an open interest increase of 904 contracts. As this report is being compiled on September 8, the September pound is trading sharply higher, up 1.88 cents and has made a daily high of 1.5412, which is the highest print since 1.5435 made on August 31.

On August 27, the September and December pound generated short and intermediate term sell signals, and we have advised clients to stand aside until the market had a counter trend rally. September 8 is the first day since the sell signal that a rally has occurred. During the precipitous price decline, total open interest been increasing every day since September 1. We attribute this to speculative interests who are guided by computer models that tell them to short the pound. From September 1 through September 4 (four trading sessions), the September contract has declined by 2.06 cents while total open interest has increased by 15,112 contracts.

We recommend a stand aside posture on September 8 because we think the rally can carry further. Additionally, we want to see the final open interest stats for today’s trading to determine whether today’s rally was due to new buying or short covering. Ideally we want to see large numbers of spec shorts blown out.

From the September 1 report on the pound:

“As this report is being compiled on September 2, the September contract is trading 13 pips above yesterday’s close and has made another new low for the move of 1.5263. On August 27, the September and December pound generated short and intermediate sell signals. Be patient and wait for the rally before initiating bearish positions.”

Yen:

The September yen advanced 72 pips on volume of 248,168 contracts. Total open interest increased by 828 contracts, which is dramatically below average, but the September contract lost 10,542 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in September and increase total open interest. We consider Friday’s price and open interest action as bullish. As this report is being compiled on September 8, the September contract is trading 60 pips lower on the day. The September and December yen remained on short and intermediate term buy signals. We have no recommendation.

WTI crude oil:

October WTI crude oil lost 70 cents on volume of 658,478 contracts. Total open interest declined by 7,658 contracts, which relative to volume is approximately 45% below average. The October contract lost 17,052 of open interest.Remarkably, total open interest action since the rally began on August 27 has been consistently bullish. Friday’s total open interest decline is bullish because total open interest should decrease when prices decline.

On September 3, OIA announced that October and November WTI generated short term buy signals, and for this signal to reverse, the high of the day must be below OIA’s key pivot point for September 8 of $43.16. We think this is unlikely at this juncture.

As this report is being compiled on September 8, the October contract is trading 19 cents below Friday’s close and has made a daily high 46.41, which is below Friday’s print of 47.23. The daily low thus far has been 44.14, which is above the September 2 print of 43.21 made after the October contract printed the high for the move of 48.87 on September 1.

September 8 is the second day (possibly the third day if counting Sunday and Labor Day) of the pullback, which is typical after the generation of a buy signal. From now on, the October/November contracts should be trading sideways to higher. Another day of corrective action may be negative and a possible set up for a reversal, but open interest action has been extremely positive, which leads us to believe that the bias of the market is higher for now. However, we remain concerned the Brent contract has not generated a short-term buy signal.

Brent crude oil:

October Brent crude oil lost $1.07 on volume of 641,235 contracts. Total open interest increased by a substantial 15,604 contracts, which relative to volume is average, but this action is bearish and reinforces our view, that either WTI is going to strengthen Brent or Brent will weaken WTI. The October contract lost 11,061 of open interest. The open interest action in WTI has been extremely bullish, but bearish in Brent.

However, as this report is being compiled on September 8, the October Brent contract is trading $1.86 higher while the October WTI contract is trading 12 cents lower. For the October Brent contract to generate a short-term buy signal, the daily low must be above OIA’s key pivot point for September 8 of $50.32.

Gold: This will be our last report on gold until we announce a signal change or see a trading opportunity.

December gold lost $3.10 on volume of 123,313 contract. Total open interest increased by a massive 5,125 contracts, which relative to volume is approximately 55% above average meaning that new short-sellers were entering the market in large numbers and driving prices lower ($1115.70).

For a short-term sell signal to occur, the high of the day must be below OIA’s key pivot of $1117.40 and for the rally to resume, the low of the day Must be above OIA’s key pivot point for September 8 of 1134.30. We do not expect the rally to resume and think a short-term sell signal will be generated shortly.

Copper:

December copper is trading 11.40 cents higher on September 8, and we will provide an analysis of today’s action on September 9. We think this is a rally in a bear market. On September 3, the December contract advanced 5.50 cents on volume of 53,804 and total open interest declined only 211 contracts. On September 3, the December contract made a high of 2.4180 and this has been taken out on September 8 (2.4480) on heavy volume.

Tomorrow, we will know whether copper is going to generate a short-term buy signal and the pivot point for September 8 is 2.3667. Although, this number will change slightly by tomorrow, the December contact will have to make a low above the pivot point in order to generate a short-term buy signal. There is an additional barrier for a continued advance, which is OIA’s pivot point of 2.4251, and we doubt that copper can make a low above this pivot.

Cocoa: December cocoa will generate short and intermediate term buy signals on September 8

December cocoa advanced $54.00 on volume of 39,895 contracts.Volume was the strongest since August 24 when 51,763 contracts were traded and the December contract closed at $3,088. On September 4, total open interest increased by an astounding 7,124 contracts, which relative to volume is approximately 475% above average meaning huge numbers of new buyers were entering the market in large numbers and driving prices to a new high for the move ($3,192), which is the highest print since 3,189 made on August 5.

On September 8, the December contract gapped sharply higher and has made a daily low of $3,202, which is above OIA’s key pivot point for the generation of short and intermediate term buy signals. The fundamentals for cocoa are positive and the threat of an El Niño type of weather event is going to keep cocoa well supported. Now that cocoa has generated short and intermediate term buy signals, we expect the market to pull back from 1-3 days and this will be the opportunity to initiate bullish positions.

From the September 6 Weekend Wrap:

“It appears that December cocoa is on the verge of generating a short-term buy signal. OIA’s key pivot point for September 4 is $3,139, although this may change slightly on September 6.On September 4, December cocoa closed at $3,168, up $54.00 and for a buy signal to occur, the low of the day must be above the pivot point.”

“The longer-term moving averages are in a bullish set up with the 50 day moving average standing at $3,192, 100 day: 3,115, the 200 day: 2,970.”

“The December contract made its contract high of 3,375 on July 15, 2015 and the contract low of 2,660 on February 2, 2015. December cocoa generated a short-term sell signal on July 27 and an intermediate term sell signal on August 12. Though managed money is net long by 3 to 1, this position is at the low end of the range going back several weeks with the low occurring two weeks ago at 2.63:1.”  

“If a short and intermediate term buy signal is generated, we expect December cocoa to test its contract high, and there is plenty of potential buying power on the sidelines to power the market substantially higher. A bull market in a commodity is rare these days.”

S&P 500 E mini:

The September S&P 500 E mini closed 24.25 points lower on volume of 2,190,903 contracts. Total open interest increased by 76,278 contracts, which relative to volume is approximately 20% above average meaning that aggressive new short-sellers were entering the market and driving prices lower (1907.75), which was the lowest print since 1907.25 made on September 2.

As this report is being compiled on September 8, the September contract is trading 34.25 points higher on the day and has made a daily high of 1961.00, which is below Friday’s print of 1973.50. At this juncture, it appears that the path of least resistance is higher in the short term. Conceivably the market may continue to move sideways to higher into the meeting of the Federal Reserve next week. The September and December S&P 500 E mini contracts remain on short and intermediate term sell signals. We have no recommendation