WasFor Bloomberg access: {OIAR }

Soybeans:

November soybeans advanced 5.00 cents on light pre-Labor Day holiday volume of 106,174 contracts. Total open interest increased by 3,872 contracts, which relative to volume is approximately 40% above average meaning that new longs were entering the market at an above average rate and moving prices higher. The September contract lost 1,412 of open interest. On August 29 soybeans have reversed, trading 7.00 cents lower and on the lows of the day, not far from its contract low of 10.19 3/4. Same story, different day: weather has been ideal, which is pressuring soybean prices. Stand aside unless short from higher levels.

Corn:

December corn advanced 4.25 cents on volume of 262,810 contracts. Total open interest declined by 16,946 contracts, which relative to volume is approximately 160% above average meaning that liquidation was heavy on the advance. The September contract, which enters 1st notice day on August 29 lost 23,848 of open interest. As this report is being compiled , December corn has reversed and is trading 6.50 cents lower and is approximately 3.50 cents from its contract low of 3.58. A very healthy corn crop is being made and the only danger to it might be an early frost. However, a bearish narrative is engulfing the grains, which means that rallies do not get far. Stand aside unless short from higher levels.

Chicago wheat:

December Chicago wheat advanced 9.50 cents on volume of 115,028 contracts. Total open interest declined by 10,963 contracts, which relative to volume is approximately 285% above average meaning that liquidation was off the charts heavy on the advance. The September contract, which enters 1st notice day on August 29 lost 8,845 of open interest.As we pointed out in yesterday’s report (see below), OIA did not think wheat would be a good candidate for bullish positions if it generated a short-term buy signal, which is not the case on August 29.

The market held up well throughout the evening session, however after the pit session opened at 9:30 a.m. CDT, December wheat fell apart, and made a daily low of 5.61 1/2, which is slightly above yesterday’s low of 5.59. As we said in yesterday’s report, the daily low in December wheat had to be above our pivot point of 5.66 5/8 in order to generate a short-term buy signal. Stand aside. However, we would advise against being short wheat, especially over the long Labor Day weekend.

From the August 27 report:

“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.”

Live cattle:

October live cattle advanced 2.275 cents on heavier than normal volume of 56,829 contracts.Volume was the strongest since August 13 when October cattle lost 1.125 cents on volume of 70,440 contracts and total open interest declined by 755 contracts. On August 28, total open interest increased by 475 contracts, which relative to volume is approximately 55% less than average. The August contract lost 822 of open interest, October – 1496, which makes the total open interest increase more impressive (bullish). There were open interest increases in the December 2014 through December 2015 contracts.

Although total open interest increased by a minor amount, this is the 1st sign we have seen that indicates new longs were initiating new positions. As a matter of fact, it was the 1st open interest increase on a price advance since August 21 when October live cattle advanced 15 points on volume of 42,714 contracts and total open interest increased by 1,157 contracts. As this report is being compiled on August 29, October live cattle is trading 57 points higher, and has taken out yesterday’s high of 1.50725. 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. Stand aside.

WTI crude oil:

October WTI crude oil advanced 67 cents on volume of 556,710 contracts. Volume was the strongest since August 19 when October WTI lost 89 cents on volume of 664,771 contracts and total open interest declined by 34,059 contracts. On August 28, total open interest increased 868 contracts, which is minuscule and dramatically below average. However, the October contract lost 8,020 of open interest, which makes the total open interest increased more impressive (bullish). As this report is being compiled on August 29, October WTI is trading 83 cents higher and has made a daily high of 95.48, which is the highest print since 95.38 made on August 15. In order for October WTI to generate a short-term buy signal, the low the day must be above OIA’s key pivot point of 95.97. October WTI remains on a short and intermediate term sell signal. Stand aside.

Natural gas: On August 28, October natural gas generated a short-term buy signal, but remains on an intermediate term sell signal.

October natural gas advanced 4.1 cents on volume of 284,053 contracts. Volume declined somewhat from August 27 when October natural gas advanced 5.4 cents on volume of 301,253 contracts and total open interest increased by 10,048 contracts. On August 28, total open interest increased again, this time by 11,099 contracts, which relative to volume is approximately 55% above average meaning that new longs were aggressively entering the market and sending October natural gas to a new high for the move at 4.101, which is the highest print since July 17 (4.110).The September contract lost 293 of open interest and the October 2014 through December 2015 contracts all gained open interest.

As we said in yesterday’s report, in order for October natural gas to generate a short-term buy signal on August 28, the low for the day had be above OIA’s key pivot point of 3.954 and the low in yesterday’s trading was 3.973.Usually, after the generation of a buy signal, the market has a tendency to pullback from 1-3 days, and this is the opportunity to initiate bullish positions. We think this is especially likely because during the past 2 sessions, total open interest has increased substantially.This makes the market vulnerable to a correction because new longs have a tendency to cut potential losses on new positions. We are in the early stage of the season, and the market will have its normal backing and filling. In short, there will be a more opportune time to initiate bullish positions.

Copper:

December copper lost 4.80 cents on volume of 52,370 contracts. Total open interest declined by 2,792 contracts, which relative to volume is approximately 105% above average meaning that liquidation was extremely heavy on the decline. The September contract accounted for loss of 1,127 of open interest. Additionally, the contango between September and December continued to widen, which is bearish. As this report is being compiled, December copper has rallied 1.05 cents however, the trend of the market is down. December copper remains on a short-term sell signal, but an intermediate term buy signal.

Gold:

December gold advanced $7.00 on volume of 118,834 contracts. Volume was the highest since August 21 when December gold lost 19.80 on volume of 154,384 contracts and total open interest declined by 1,250 contracts. On August 28, total open interest increased by a massive 4,588 contracts, which relative to volume is approximately 50% above average meaning that new longs were aggressively entering the market and pushing prices to a new high for the move (1297.60), which is the highest print since 1299.30 made on August 20. As this report is being compiled on August 29, December gold is trading 3.90 lower and remains on a short and intermediate term sell signal.

Silver:

December silver advanced 13.4 cents on heavy volume of 79,815 contracts. Volume was the highest since 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 28, total open interest increased by 951 contracts, which relative to volume is approximately 45% below average. The September contract lost 8,480 of open interest, which makes the total open interest increase more impressive (bullish). Additionally, the December 2014 through March 2016 contracts all gained open interest. As this report is being compiled on August 29, December silver is trading 11.9 cents lower. December silver remains on a short and intermediate term sell signal. Stand aside.

Canadian dollar: On August 28, the September Canadian dollar generated a short-term buy signal, but remains on an intermediate term sell signal.

The September Canadian dollar lost 10 pips on volume of 57,852 contracts. Total open interest declined by 3,475 contracts, which relative to volume is approximately 140% above average meaning that liquidation was very heavy on the modest decline. However, on August 27, the September Canadian dollar advanced 95 pips on very heavy volume of 103,979 contracts and total open interest increased by 6,011 contracts.Therefore, it would not be unusual to see a large open interest decline after a big range day higher. Usually, after the generation of a short-term buy signal, the market has a tendency to pullback from 1-3 days, and this is the opportunity to initiate bullish positions. Stand aside.

Australian dollar:

The September Australian dollar advanced 17 pips on volume of 85,364 contracts. Total open interest increased by 5,599 contracts, which relative to volume is approximately 160% above average meaning that large numbers of new longs were entering the market and driving prices higher (93.64), which is the highest print since 93.86 made on July 29.In order for the September Australian dollar to generate a short-term buy signal, the low the day must be above OIA’s key pivot point of 93.27, and the low on August 29 has been 93.23. Stand aside.

Cotton:

December cotton lost 88 points on volume of 19,210 contracts. Volume declined from August 27 when December cotton advanced 57 points on volume of 23,624 contracts and total open interest increased by 2,837 contracts. On August 28, total open interest declined by 169 contracts, which relative to volume is approximately 55% below average. The October contract lost 12 of open interest, December -1250.

Ever since December cotton generated a short-term buy signal on August 22, the market continued to rally through August 27. In short, December cotton did not have the usual 1 to 3 day pullback immediately after the generation of a buy signal. The pullback began on August 28 and continues on August 29. As this report is being compiled, December cotton is trading 18 points lower on the day and has made a daily low of 65.76, which breaks below yesterday’s low of 66.12. Cotton has had 3 consecutive days of large open interest increases (August 25 – August 27) and it is perfectly normal to see some liquidation. Maintain bullish positions, but exit these upon penetration of 65.01, the low made on August 25.

Coffee:

December coffee advanced 1.85 cents on volume of 20,638 contracts. Total open interest increased by 542 contracts, which relative to volume is average. The September contract lost 19 of open interest, December -1009, which makes the total open interest increase more impressive (bullish). As this report is being compiled on August 29, December coffee has made a new closing high of 2.0120, which is 1.20 cents above yesterday’s close and the highest close since May 15 (2.0200). Maintain bullish positions.