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Soybeans:

November soybeans lost 4.50 cents on volume of 135,624 contracts. Total open interest increased by 5,506 contracts, which relative to volume is approximately 55% above average meaning that new short sellers were entering the market and driving prices lower. The September contract accounted for loss of 1,547 of open interest. As this report is being compiled on August 28, November soybeans are trading 2.50 cents higher on the day. Stand aside unless short from higher levels.

USDA reported cancellations of 62.84 thousand metric tons bringing total commitments to date to 1.691.2 billion bushels compared to the USDA projections for the season of 1.640 billion bushels.

Corn:

December corn closed unchanged on volume of 218,909 contracts. Total open interest declined by 17,220 contracts, which relative to volume is approximately 210% above average meaning that liquidation was extremely heavy. Accounting for this was the loss of 23,332 contracts for September. As this report is being compiled on August 28, December corn is trading 2.75 cents higher and has made a daily high of 3.70, which is the highest print since August 25 (3.70 1/4). Stand aside unless short from higher levels.

Chicago wheat:

December Chicago wheat advanced 5.75 cents on volume of 70,377 contracts. Total open interest declined by 1,628 contracts, which relative to volume is approximately 10% below average. The September contract accounted for loss of 4,917 of open interest. As this report is being compiled on August 28, December Chicago wheat is trading 12.00 cents higher and has made a daily high of 5.79 1/4, which is the highest print since 5.78 1/2 made on August 8. As this report is being compiled on August 28, December Chicago wheat is trading 11.75 cents higher on escalating tension between Ukraine and Russia. Where this goes is anybody’s guess, but if all out war breaks out, wheat will be the beneficiary.

To date however, exports from the Black sea region have not been impaired, and the move higher is probably more psychological than anything else except for the massive short position held by managed money. This could cause wheat to spike higher by massive short covering similar to what we saw in copper. The fundamentals for Chicago wheat are bearish. According to OIA protocols, a short-term buy signal will be generated if the daily low is above our pivot point of 5.66 5/8. While we certainly think this is possible, wheat is not likely to be a good candidate for bullish positions, especially because diminishing tensions or an attempt to broker peace would cause wheat to fall sharply. December Chicago wheat remains on a short and intermediate term sell signal. Stand aside. If short, we would cover.

The USDA reported sales of 403.6 thousand metric tons bringing the total commitments to date to 414 million bushels versus USDA projections for the season of 925 million bushels. The recently reported sales are the highest since 590.9 thousand metric tons reported 3 weeks ago.

Live cattle:

October live cattle lost 42.5 points on volume of 38,114 contracts. Total open interest increased by 198 contracts, which relative to volume is approximately 75% below average. The August contract lost 624 of open interest, October – 1349. As this report is being compiled on August 28, October cattle is trading 2.050 higher and has made a daily high of 1.50725, which is the highest print since 1.50725 made on August 12. Since making its low for the move at 1.44225 on August 20, open interest action has declined as prices moved higher. Both longs and shorts were liquidating, and in order for cattle prices to generate a short-term buy signal, there must be new longs willing to enter the market aggressively at ever higher prices. In order for October cattle to generate a short-term buy signal, the low the day must be above OIA’s key pivot point of 1.52575.

WTI crude oil:

October WTI crude oil advanced 2 cents on light pre-Labor Day holiday volume of 343,334 contracts. Total open interest increased by 3,002 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on August 28, October WTI is trading 64 cents higher and has made a daily high of 94.71, which is the highest print since 95.14 made on August 18. Though WTI crude has been on a short and intermediate term sell signal, we have been recommending a stand aside posture due to the extremely oversold condition and that a rally is inevitable. More political trouble in the Middle East and Ukraine may  surface, which could cause the market to rally further. Continue to stand aside.

Natural gas: On August 27, March 2015 natural gas generated a short-term buy signal, but remains on an intermediate term sell signal.

October natural gas advanced 5.4 cents on heavier than normal volume of 301,253 contracts. Volume was the strongest since August 21 when natural gas advanced 7.00 cents on volume of 311,707 contracts and total open interest increased by 2,321 contracts. On August 27, total open interest increased by a strong 10,048 contracts, which relative to volume is approximately 30% above average.

As this report is being compiled on August 28, October natural gas is trading 1.7 cents lower after making a new high for the move at 4.101, which is the highest print since July 17 (4.110). In order for October natural gas to generate a short-term buy signal on August 28, the low for the day must be above OIA’s key pivot point for August 28 of 3.954.It should be noted that beginning with the January 2015 contract, the term structure of natural gas is inverted, which is bullish going forward. After the generation of the buy signal, the market should pull back for 1-3 days and this will be the opportunity to initiate bullish positions.

The Energy Information Administration announced that working gas in storage was 2,630 Bcf as of Friday, August 22, 2014, according to EIA estimates. This represents a net increase of 75 Bcf from the previous week. Stocks were 490 Bcf less than last year at this time and 518 Bcf below the 5-year average of 3,148 Bcf. In the East Region, stocks were 239 Bcf below the 5-year average following net injections of 61 Bcf. Stocks in the Producing Region were 225 Bcf below the 5-year average of 1,036 Bcf after a net injection of 5 Bcf. Stocks in the West Region were 54 Bcf below the 5-year average after a net addition of 9 Bcf. At 2,630 Bcf, total working gas is below the 5-year historical range.

Copper:

December copper lost 1.40 cents on volume of 57,147 contracts. Total open interest declined by a massive 5,429 contracts, which relative to volume is approximately 300% above average meaning that liquidation was off the charts heavy. As this report is being compiled on August 28, December copper is trading 4.20 cents lower and has made a daily low of 3.1425, which is the lowest print since 3.0840 made on August 20.We have been warning that the move higher in copper was suspect and the open interest action during the rally was characterized by liquidation, not by new buyers aggressively bidding prices higher.

From the August 24 Weekend Wrap:

“Despite the sharp move higher during 2 of the past 3 trading sessions, open interest has been declining, which is very negative for copper prices moving forward. For example, on August 20 when copper advanced 8.85 cents, total open interest declined by 3,772 contracts. On August 21 when copper declined fractionally by 10 points, total open interest declined by 2,686 contracts, and preliminary stats for August 22 show total open interest declined 593 contracts on volume of 54,971.We only use final numbers and these will not be released until Monday, therefore total open interest is subject to change. However, the picture for the past 3 days has not been one of a robust bull market, but rather one characterized by liquidation.”

Gold:

December gold lost $1.80 on light pre-labor holiday volume of 79,180 contracts. Total open interest declined by 2,634 contracts, which relative to volume is approximately 30% above average meaning that liquidation was fairly heavy on the modest decline. As this report is being compiled on August 28, December gold is trading $6.90 higher and has made a new high for the move at 1297.60, which is the highest print since 1299.30 made on August 20. December gold remains on a short and intermediate term sell signal. Stand aside.

Silver:

December silver gained 1.6 cents on very heavy volume of 78,909 contracts. Volume shrank from August 26 when December silver advanced 2.8 cents on volume of 83,116 contracts and total open interest declined by 2,080 contracts. On August 27, total open interest declined by a massive 5579 contracts, which relative to volume is approximately 185% above average meaning that liquidation was extremely heavy. As this report is being compiled on August 28, December silver is trading 11.5 cents higher after making a daily high of 19.950, which is the highest print since August 15 ($20.000). December silver remains on a short and intermediate term sell signal. Stand aside.

Euro:

The September euro advanced 23 pips on volume of 193,196 contracts. Total open interest increased by 6,241 contracts, which relative to volume is approximately 30% above average. As this report is being compiled on August 28, the September euro is trading 20 pips lower after making a new high for the move at 1.3222. We recommend a stand aside posture, because we could see a  move higher in the euro similar in magnitude to the rally in the Canadian dollar on August 27.

Canadian dollar: It appears likely that the September Canadian dollar will generate a short-term buy signal on August 28, but will remain on an intermediate term sell signal.

The September Canadian dollar advanced 95 pips on very heavy volume of 103,979 contracts.Volume was the highest since June 12 when 116,333 contracts were traded and the September Canadian dollar closed at 91.92. On August 27, total open interest increased by a heavy 6,011 contracts, which relative to volume is approximately 105% above average meaning that new longs were aggressively entering the market and driving prices to a daily high of 92.31, which is the highest print since 92.50 made on July 29.

The move higher in the Canadian dollar should be troubling to anyone short because the action yesterday was not one of liquidation, which would have been bearish, but of new longs initiating positions. What makes this especially concerning is that managed money is  short the Canadian dollar by ratio of 1.27:1. If the Canadian dollar generates a short-term buy signal on August 28, the market should pullback from 1-3 days and this is the opportunity to initiate bullish positions.

Australian dollar:

The September Australian dollar advanced 34 pips on volume of 72,550 contracts. Total open interest increased by a massive 6,920 contracts, which relative to volume is approximately 300% above average meaning that huge numbers of new longs were entering the market and driving prices to their highest level since August 7 (93.35). It appears the Australian dollar is likely to generate a short and intermediate term buy signal perhaps by tomorrow.

Cotton:

December cotton advanced 57 points on volume of 23,624 contracts. Volume on August 27 was the highest since December cotton generated a short-term buy signal on August 22. On August 27, total open interest increased by a massive 2,837 contracts, which relative to volume is approximately 320% above average meaning that new longs were aggressively entering the market and pushing cotton prices to a high of 67.72, which is the highest print since July 24 (68.24). The heavy volume accompanied by a massive increase in open interest indicates that cotton may have reached a temporary top and needs to pullback before resuming its uptrend . As this report is being compiled on August 28, December cotton is trading 72 points lower on the day. Maintain bullish positions and plan to exit the trade upon the penetration of 65.01, the low made on August 25.

Coffee:

December coffee advanced 70 points on volume of 24,326 contracts. Interestingly, volume increased from August 26 when December coffee advanced 9.80 cents on volume of 20,553 contracts and total open interest increased by 3,308 contracts.  On August 27, total open interest declined by 395 contracts, which relative to volume is approximately 35% below average. The September contract lost 89 of open interest, December -1293. As this report is being compiled, coffee has closed at $2.0000, up 1.85 cents, which is the highest close since May 15 (2.0200). Maintain bullish positions.