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Soybeans:

November soybeans lost 12.75 cents on volume of 149,269 contracts. Total open interest increased by 2,349 contracts, which relative to volume is approximately 35% less than average. The September contract lost 3,212 of open interest and 1st notice day is on August 29. As this report is being compiled on August 26, November soybeans are trading 8.75 cents lower and have made a new contract low at 10.19 3/4, which is its lowest print since the week of September 13, 2010 (10.18 3/4). Every day that passes with nearly ideal weather is a day when soybean prices decline. This prospect for a large crop is being discounted and there is not any viable support until the low $9.00 level. There has not been a rally of any magnitude lately that would have enabled clients to establish new short positions. If not short from higher levels, stand aside.

Soybean meal:

December soybean meal lost $9.00 on volume of 115,786 contracts. Volume shrank considerably from August 22 when December meal advanced 6.20 on volume of 131,157 contracts and total open interest increased by 5,195 contracts. On August 25, total open interest declined by a substantial 5,211 contracts, which relative to volume is approximately 75% above average meaning that liquidation was very heavy on the decline. The September contract accounted for loss of 6,068 of open interest. As this report is being compiled on August 26, December soybean meal is trading 2.60 lower. Soybean meal is vulnerable to significant liquidation due to the very large long position of manage money. Stand aside if not short from higher levels.

Corn:

December corn lost 4.00 cents on volume of 229,778 contracts. Total open interest declined by 7,488 contracts, which relative to volume is approximately 30% above average and the September contract which enters 1st notice day on August 29 lost 16,117 of open interest. As this report is being compiled on August 26, December corn is trading 5.00 cents lower and has made a daily low of 3.61 3/4, which is only a couple of cents above its contract low of 3.58. Stand aside if not short from higher levels.

Chicago wheat:

December Chicago wheat lost 7.75 cents on volume of 75,123 contracts. Total open interest declined 895 contracts, which relative to volume is approximately 45% less than average. The September contract accounted for loss of 5,412 of open interest. As this report is being compiled on August 26, December Chicago wheat is trading 6.25 cents lower and has made a daily low of 5.46 3/4, which is not far from its contract low of 5.42 1/4 made on July 29. If not short from higher levels, stand aside.

Live cattle:

October live cattle advanced 1.15 cents on light volume of 39,180 contracts. Total open interest declined by 2,390 contracts, which relative to volume is approximately 140% above average meaning that liquidation was extremely heavy on the advance. The August contract lost 748 of open interest, October -1464, December -581.We have been saying for quite some time that cattle needs substantial liquidation by managed money before a rally of any significance can get underway. During the past 2 days (August 22 and 25) October cattle has advanced 2.60 cents, but total open interest for the 2 day period has declined each day for a total of 3,347. Market participants are liquidating on rallies as we have been saying for weeks. There is a very good chance that cattle will attempt to test its contract high, but not in the immediate future.October cattle remains on a short and intermediate term sell signal. Stand aside.

From the August 24 Weekend Wrap:

“By the tabulation of the August 19 report, October cattle closed at 1.47225, and yet the net long position of managed money had fallen only 2,806 contracts to 99,581. During this time October cattle lost 11.85 cents. In short, there are undoubtedly large numbers of speculators who are showing losses or minor gains and will look for every opportunity to liquidate positions on any rally. This will keep a lid on advances despite the bullish scenario going forward. October cattle remains on a short and intermediate term sell signal. Stand aside.”

WTI crude oil:

October WTI crude oil lost 30 cents on light pre-Labor Day holiday trading of 244,240 contracts. Total open interest increased by 5,958 contracts, which relative to volume is average. The October contract lost 783 of open interest. As this report is being compiled on October 26, October WTI is trading 22 cents higher and has made a daily high of 94.35 which nearly took out the high of 94.45 made on August 21 which was the highest print since August 18 (95.14).

From the week of June 16 through the week of August 18, October WTI crude oil has declined each week with the exception of July 14. In short, October WTI has declined 9 of the past 10 weeks. October WTI should find support at 91.24, which was the low made during the week of January 6, 2014 and 91.43 made during the week of January 13, 2014. Although WTI looks weak, the downside may actually be somewhat limited at this juncture. At this time last year, (week of August 26, 2013), October 2013 WTI was trading in a range of $105.88-112.24. October WTI remains on a short and intermediate term sell signal. Stand aside.

Natural gas:

October natural gas advanced 9.6 cents on volume of 218,159 contracts. Total open interest increased by a massive 7,543 contracts, which relative to volume is approximately 40% above average meaning that new longs were aggressively bidding prices to their highest level since August 21 (3.988). The September contract lost 5,419 of open interest, which makes the total open interest increase much more impressive (bullish). As this report is being compiled on August 26, October natural gas is trading 1.6 cents higher and has made a new high for the move at 4.021, which is the highest print since 4.041 made on August 12.October natural gas remains on a short and intermediate term sell signal. Stand aside.

Copper:

December copper advanced 1.40 cents on light volume of 32,423 contracts. Total open interest increased by 1,416 contracts, which relative to volume is approximately 70% above average meaning that new longs were heavily entering the market and driving prices to a new high for the move of 3.2460, This is the highest print since 3.2600 made on August 11 when copper made a spike high on total volume of 67,149 contracts, and closed up 10 points on the day, while total open interest declined by 1,901 contracts.The September contract accounted for loss of 3,084 of open interest.

In our view, the massive increase of open interest in yesterday’s trading was the result of Johnny-come-lately’s, who decided to get long at the top of the trading range. As we pointed out in yesterday’s report, December copper had to make a daily low above OIA’s key pivot point of 3.2330 in order to generate a short-term buy signal.This has not occurred, and in our view does not look likely. The market cleared out a good portion of speculative longs during the down trend which began on July 25 through August 14 and has now cleared out a good portion of speculative shorts.

Gold:

December gold lost $1.30 on very light pre-Labor Day holiday volume of 57,562 contracts. Total open interest increased by 609 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on August 26, December gold is trading 6.50 higher on light volume. December gold remains on a short and intermediate term sell signal. Stand aside.

Silver:

December silver lost 2.8 cents on volume of 46,326 contracts. Total open interest declined by 265 contracts, which relative to volume is approximately 70% below average. The September contract accounted for loss of 5,859 of open interest.As this report is being compiled on August 26, December silver is trading 2.9 cents higher and has made a daily high of 19.735, which is the highest print since 19.765 made on August 19. December silver remains on a short and intermediate term sell signal. Stand aside.

Euro:

The September euro lost 49 pips on light pre-Labor Day holiday volume of 117,665 contracts. Total open interest declined by 2,566 contracts, which relative to volume is approximately 15% below average. Yesterday, the September euro made a low of 1.3185, and as this report is being compiled on August 26 has made another new low at 1.3166, but is quite a distance from its contract low of 1.2833. We continue to advise a stand aside posture for those who were not short at higher levels. The market could rally at any time, which would cause shorts to move to the exit due to the massive short position held by speculators.

Coffee:

December coffee advanced 30 points on light volume of 10,726 contracts. However, total open interest increased by a massive 957 contracts, which relative to volume is approximately 250% above average, meaning there was a battle between longs and shorts, and longs were able to move the market only fractionally higher. However, the massive increase of open interest on August 25 has been resolved on August 26 and the longs clearly have the upper hand. The December contract has closed at 1.9745, up 9.80 cents and the highest close since July 31 (1.9875).

We have been advising clients to hold a small bullish position, because we were concerned that coffee might continue to shake out longs, and possibly break below the low of 1.8285 made on August 20. If this were to occur we thought it was possible for coffee to generate a short-term sell signal. With today’s action, it appears coffee is out of the woods, but will likely continue to be one of the most volatile commodities traded. As we mentioned in the weekend report, we were concerned that coffee could turn on a dime, even though its performance had been disappointing. As a result, we recommended a small bullish position. We think coffee is likely to test the April 23 high of 2.2260.

From the August 24 Weekend Wrap: 

“It has become apparent that coffee is not ready to make its move, but because the market can turn on a dime, we have recommended a small bullish position, which should be liquidated upon penetration of the August 20 low of 1.8285. A close below OIA’s key pivot point of 1.8060, would increase the likelihood of December coffee generating a short-term sell signal.”

Cotton:

December cotton lost 3 points on light volume of 15,538 contracts. Total open interest increased by a massive 1869 contracts, which relative to volume is approximately 400% above average meaning there was a major battle between longs and shorts and neither side was able to move the market beyond a fractional loss.The October contract lost 6 of open interest and there were open interest increases across the board. Between 9:40 – 9:45 a.m. CDT on August 25, December cotton made a spike low to 65.01 on heavy volume of 1,214 contracts on the 5 minute chart.

OIA always points out when volume or open interest spikes occur, because very often this signifies a major top or bottom. The low of 65.01 made yesterday is a solid tradeable low, and should be used as an exit point for bullish positions. The market action on August 25 was excellent, and subsequent trading on August 26 confirms the trend is higher. The relatively large short position of manage money will add fuel to the upside move.As this report is being compiled On August 26, December cotton is trading 67 points higher and has made a new high for the move to 66.95, which is the highest print since 68.24 made on July 24.

From the August 24 Weekend Wrap:

“In order for cotton to continue to move higher, the December contract needs to close above OIA’s  pivot point 66.64 and then make a daily low above the pivot. After this, closes above OIA’s pivot points of 67.73 and 68.54. As long as cotton continues to advance above these pivot points, the uptrend is intact.”