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On September 2, most commodities are trading sharply lower, and this is likely due to the dollar index reaching new highs. Open Interest Analyst announced the dollar index generated a short and intermediate term buy signal on July 16.

Soybeans:

November soybeans lost 4.50 cents on light pre-holiday volume of 96,583 contracts.However, total open interest increased by a massive 8,525 contracts, which relative to volume is approximately 250% above average meaning that new short sellers were extremely aggressive about driving prices lower. The September contract lost 473 of open interest. As this report is being compiled on September 2 , November soybeans are trading 10.25 cents higher on the day. Stand aside unless short from higher levels.

Corn:

December corn lost 4.50 cents on light pre-holiday volume of 173,953 contracts.Total open interest increased by 1,006 contracts, which relative to volume is approximately 70% below average. The September contract accounted for loss of 7,871 of open interest. As this report is being compiled on September 2, December corn is trading 0.50 cents lower. Stand aside unless short from higher levels.

Chicago wheat:

December Chicago wheat lost 8.25 cents on light pre holiday volume of 67,510 contracts. Total open interest declined by 3,422 contracts, which relative to volume is approximately 100% above average meaning that liquidation was extremely heavy. The September contract accounted for loss of 2,368 of open interest. On August 29, December Chicago wheat made a high of 5.78 3/4, which is slightly below the high of August 28 (5.79 1/4) and this was the highest print since August 7 (5.86 3/4). However, the high on Friday was unable to hold, and the market closed lower.December Chicago wheat made its contract low on July 29 (5.42 1/4), and for December wheat to challenge the contract low, the high of the day must be below OIA’s key pivot point of 5.52 5/8. We continue to recommend a stand aside posture because of the continuing tension in the black sea region.

Live cattle: December cattle will generate a short and intermediate term buy signal on September 2.

December live cattle advanced 1.250 cents on light volume of 45,408 contracts. Total open interest increased by a sizable 1,714 contracts, which relative to volume is approximately 50% above average meaning that aggressive new longs were entering the market and driving prices to their highest level since August 7 (1.56525). The August contract lost 319 of open interest, October – 411, which makes the total open interest increase much more impressive (bullish). From August 21 through September 2, cattle has advanced each day with the exception of August 27 when December cattle closed 47.5 points lower on the day. After the generation of the buy signal, the market should pull back from 1-3 days and the pullback is the opportunity to initiate bullish positions.

Lean hogs: December lean hogs will generate a short-term buy signal on September 2, but will not generate an intermediate term buy signal.

December lean hogs advanced 1.625 cents on volume of 52,842 contracts. Total open interest increased by 547 contracts, which relative to volume is approximately 50% below average. The October contract accounted for loss of 2,899 of open interest. As this report is being compiled on September 2, December hogs are trading 90 points higher and have made a daily high of 94.850, which is the highest print since 94.575 made on August 7. From August 21 through September 2, December hogs have advanced each day with the exception of August 22 and 28. After the generation of the buy signal, there should be a pullback lasting 1-3 days and this will be the opportunity to initiate bullish positions.

From the August 31 Weekend Wrap:

“The current ratio of 3.27:1, is the lowest since the COT tabulation date of January 21, 2014 when managed money was long lean hogs by ratio of 3.15:1. The high for the ratio occurred in the COT report of April 22 when managed money was long lean hogs by ratio of 49.42:1.”

“From August 21 through August 28, December hogs have advanced 2.825 cents and during this time, total open interest increased 8,441 contracts, which is bullish open interest action relative to the price advance.”

” It now appears that hogs are on the upswing and that a short-term buy signal will be generated shortly. For this to occur, the low the day must be above OIA’s key pivot point of 91.320.”

“Another factor weighing in favor of a continued advance is the seasonal tendency for hog prices to bottom in late August and trend higher into mid October. The term structure of hogs is bullish with the December contract selling at a premium to February and April 2015. Also, the number of speculative longs have been squeezed out of the market as evidenced by the multi-month low in the net long position of managed money. OIA will provide guidance regarding the timing to enter bullish positions once the short-term buy signal has been generated.”

WTI crude oil:

October WTI crude oil advanced $1.41 on surprisingly heavy pre–holiday volume of 540,348 contracts.Total open interest increased by a very disappointing 1,491 contracts, which is minuscule and dramatically below average. The October contract lost 11,254 of open interest. As this report is being compiled on September 2, the October contract has collapsed $2.71 on heavy volume along with the rest of the petroleum complex. Undoubtedly, the sharply higher dollar is a factor in the decline, however WTI has been on a downtrend since late July. October WTI remains on a short and intermediate term sell signal. Stand aside unless short from higher levels.

Natural gas:

October natural gas advanced 2.1 cents on volume of 177,070 contracts. Total open interest increased by 5453 contracts, which relative to volume is approximately 20% above average. The October contract accounted for loss of 35 of open interest. As this report is being compiled on September 2, October natural gas is trading sharply lower down 3.37%, or -13.7 cents. The strength of the downside move surprises us, but we warned clients to wait for a pullback that we said would last 1 to 2 days. This is the first pullback since the generation of the buy signal on August 28. Continue to stand aside.

 From the August 31 Weekend Wrap:

“Now that October natural gas has generated a short-term buy signal, the market should have a small pullback lasting 1 maybe-2 days, and this is the opportunity to initiate bullish positions. October natural gas should find support at 3.930, slightly beneath the lows of August 26 (3.936) and August 27 (3.932 ) and the 20 day moving average of 3.932. The 50 day moving average is 4.050 and October natural gas closed at 4.065 on August 29, which means the pullback may be very shallow and short-lived.”

“The first indications the buy signal is false would be a close below $3.906, then 3.856.”

Euro:

The September euro lost 50 pips on heavy volume of 207,251 contracts.Volume was the strongest since August 22 when the September euro lost 39 pips on volume of 209,156 contracts and total open interest increased by 4,933 contracts. On August 29, total open interest increased by 3092 contracts, which relative to volume is approximately 40% below average. As this report is being compiled on September 2, the euro is trading down 3 pips and has made a new low for the move at 1.3111. However, the Japanese yen is down sharply as is the British pound, Canadian dollar and Australian dollar. This is causing the dollar to make new highs for the move at 83.060. Stand aside unless short from higher levels.

Gold:

December gold lost $3.00 on light volume of 81,646 contracts. Total open interest declined by 447 contracts, which relative to volume is approximately 75% below average. As this report is being compiled on September 2, December gold is trading sharply lower, down 1.72%, or -$22.10 and has made a new low for the move at 1263.10, which is the lowest print since June 17 (1259.60). December gold remains on a short and intermediate term sell signal. Stand aside.

Silver:

December silver lost 11.7 cents on light volume of 36,582 contracts. However total open interest increased by a massive 2016 contracts, which relative to volume is approximately 120% above average meaning that new aggressive short sellers were heavily entering the market and driving prices lower. The September contract lost 571 of open interest, which makes the total open interest increase more impressive (bearish).As this report is being compiled on September 2, December silver is trading 30.2 cents lower and has made a new low for the move at 19.110, which is the lowest print since June 10 (19.065). December silver remains on a short and intermediate term sell signal. Stand aside.

Cotton:

December cotton lost 1 point on volume of 18,540 contracts. Total open interest declined by 306 contracts, which relative to volume is approximately 35% less than average. As this report is being compiled on September 2, December cotton is trading 1.34 cents lower, but surprisingly has not taken out the low of 65.01 made on August 25, however this seems inevitable. On August 22, December cotton generated a short-term buy signal, and since then was unable to close above 2 of OIA’s pivot points of 67.73 and 68.54 and make a low for the day above the pivot point of 66.64. As we pointed out in the August 24 report, we did not think that cotton was going to be a major mover, and advised against making major commitments. At this juncture, we suggest liquidating any outstanding positions and moving to the sidelines.For the downtrend to resume, the high of the day must be below OIA’s key pivot point of 64.35.

From the August 24 Weekend Wrap:

“Now that December cotton is on a short-term buy signal, it should have a pullback lasting a day or 2, and this would be the opportunity to establish bullish positions. However, we think the rally is not likely to be a barn burner and therefore clients should not make major commitments. When initiating new bullish positions we recommend using a bull put spread or bull call spread. The first sign of danger for December cotton would be a close below 63.97. 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.”

Coffee:

December coffee advanced 1.20 cents on light volume of 15,928 contracts. Volume shrank from August 28 when December coffee advanced 1.85 cents on volume of 20,638 while open interest increased 542 contracts. On August 29, open interest increased just 51 contracts. The September contract lost 27 of open interest, December – 451, which makes the very minor increase of open interest more impressive (bullish). As this report is being compiled on September 2, December coffee has rocketed 8.25 cents higher and has closed at $2.0945, which is the highest closing print since May 5 ($2.0980).December coffee is headed to its contract high of 2.2260. Maintain bullish positions.