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In the September 11 report, we will provide the highlights of the USDA report.

Soybeans:

November soybeans gained 1.00 cent on light volume of 125,644 contracts. Total open interest increased by 2,637 contracts, which relative to volume is approximately 20% below average. The September contract lost 64 of open interest, November -3,020. As this report is being compiled after the release of the USDA World Supply Demand report, November soybeans are trading sharply lower, down 15.75 cents and have made a new contract low at 9.69 1/2. The September soybean contract is trading 26 cents lower on the day.Although managed money has significantly increased their net short position in soybeans, according to the most recent Commitment of Traders report, they still remains long by ratio of 1.24:1 and commercial interests are net long by ratio of 1.11:1. In short, there is a significant amount of selling pressure left in the market, and we hypothesize that soybeans will not bottom until managed money assumes a net short position. November soybeans remain on a short and intermediate term sell signal. Stand aside.

The USDA reported sales of 984.3 thousand metric tons bringing total commitments to date of 881.8 million bushels versus USDA projections for the 2014-2015 season of 1.640 billion bushels.

Corn:

December corn gained 1.50 cents on volume of 153,507 contracts. Total open interest increased by 611 contracts, which is approximately 85% below average. The September contract accounted for loss of 998 of open interest, December -4,029. As this report is being compiled on September 11 after the release of the USDA report, December corn is trading 7.50 cents lower and has made a new contract low at 3.35 3/4.Managed money remains long corn by ratio of 1.34:1, and like soybeans, we hypothesize that a bottom will not be reached until managed money assumes a net short position.December corn remains on a short and intermediate term sell signal. Stand aside.

The USDA reported sales of 563 thousand metric tons bringing total commitments to date of 487.4 for the 2014-2015 season versus USDA projections for the season of 1.725 billion bushels.

Chicago wheat:

December Chicago wheat lost 7.75 cents on light volume of 56,581 contracts. Total open interest increased by 1,298 contracts, which relative to volume is approximately 10% below average. The September contract lost 113 of open interest. As this report is being compiled on September 11, December Chicago wheat is trading sharply lower, down 14.50 cents and has made a new contract low at $5.03.December Chicago wheat remains on a short and intermediate term sell signal. Stand aside.

Live cattle:

December live cattle lost 17.5 points on heavy volume of 97,757 contracts. Total open interest increased by a massive 8,319 contracts, which relative to volume is approximately 230% above average meaning that new longs and shorts engaged in a battle, and short sellers were able to move the market fractionally lower. The October contract accounted for loss of 6,051 of open interest and there were open interest increases in the December 2014 through February 2016 contracts.December live cattle traded to a new contract high of 1.63875, but couldn’t hold the high and sold off to close lower.As this report is being compiled on September 11, December cattle is trading 2.175 cents lower. The October contract is trading down 2.050 cents. Although the long October 2014, short December 2014 or February 2015 spread has not been a good performer, if clients want to trade the long side of this market, a bull spread is one of safest way of doing it. However, OIA does not see a compelling reason to be involved in the market due to the possibility of  it topping at current lofty levels.

Lean hogs:

December lean hogs gained 40 points on volume of 75,283 contracts.Total open interest increased by 1,074 contracts, which relative to volume is approximately 40% less than average. The October contract lost 4,684 of open interest and there were open interest increases in the December 2014 through July 2015 contracts. Yesterday, the October 2014 short December 2014 spread widened by 92.5 points and as this report is being compiled on September 11 this spread has widened again by 1.100 cents. Like cattle, we think the only way to trade lean hogs is through a bull spread, which reduces risk.

WTI crude oil:

October WTI crude oil lost $1.08 on heavy volume of 695,644 contracts.Volume was the strongest since August 15 when 699,855 contracts were traded and October WTI advanced $1.24 while total open interest declined by a massive 36,969 contracts. On September 10, total open interest increased by 9,493 contracts, which relative to volume is approximately 45% less than average, but the October contract lost 10,858 of open interest, which makes the total open interest increase more impressive (bearish).

Yesterday, October WTI made a new low for the move at 91.22, and as this report is being compiled on September 11, October WTI has made another new low at 90.43, but is currently trading 85 cents higher on the day.We want to call your attention to the fact that the inversion in the term structure of WTI has stayed intact during the entire length of the bear market. On the other hand, the term structure in Brent is one of the contango.We advise against entering new short positions in WTI, especially with WTI in backwardation. Additionally, we would avoid the short side of the Brent market.

Natural gas:

October natural gas lost 3.00 cents on light volume of 195,538 contracts. Total open interest declined by 3,360 contracts, which relative to volume is approximately 25% less than average. The October contract accounted for loss of 8,228 of open interest. As this report is being compiled on September 11, October natural gas is trading 14.4 cents lower and currently is trading on the lows of the day. We have been advising a stand aside posture in natural gas despite it making a triple bottom.As we have been saying for the past couple of days, natural gas had to make a low above our pivot point, before a buy signal would be generated and this has not occurred. Natural gas has been wreaking havoc on both bulls and bears with its choppy trading. Thus far, temperatures have been mild across the US, and it may take a cold spell before natural gas can breakout to the upside.

From the September 8 report:

“In order for October natural gas to generate a short-term buy signal, its daily low must be above OIA’s key pivot point of 3.955. There is one characteristic that separates the current move higher from the previous one: the spread between the front and back months is widening. This is bullish and we made a note of this in the September 7 Weekend Wrap. As this report is being compiled on September 9, October natural gas is trading 12.8 cents higher at $4.000. Once a buy signal is generated, the market should have a pullback lasting from 1-3 days and this will be the opportunity to initiate bullish positions. Stand aside until the buy signal has been generated.”

The Energy Information Administration announced that working gas in storage was 2,801 Bcf as of Friday, September 5, 2014, according to EIA estimates. This represents a net increase of 92 Bcf from the previous week. Stocks were 443 Bcf less than last year at this time and 463 Bcf below the 5-year average of 3,264 Bcf. In the East Region, stocks were 215 Bcf below the 5-year average following net injections of 60 Bcf. Stocks in the Producing Region were 211 Bcf below the 5-year average of 1,052 Bcf after a net injection of 20 Bcf. Stocks in the West Region were 38 Bcf below the 5-year average after a net addition of 12 Bcf. At 2,801 Bcf, total working gas is below the 5-year historical range.

Copper: On September 10, December copper generated in intermediate term sell signal after generating a short-term sell signal on August 6.

December copper gained 85 points on volume of 46,683 contracts. Total open interest declined by 512 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on September 11, December copper has made a new low for the move at 3.0625, which is the lowest print since June 20 ($3.0670).However, this is quite a distance from the contract low of 2.8845.Stand aside.

Gold:

December gold lost $3.20 on volume of 151,932 contracts. Total open interest increased by only 329 contracts. However, September 10 marked the 5th day in a row that open interest increased as gold moved lower. Yesterday, December gold made a new low for the move at 1244.50, and on September 11 has made another new low at 1235.30. December gold remains on a short and intermediate term sell signal. Stand aside.

Silver:

December silver gained 6 ticks on light volume of 36,944 contracts. Total open interest increased by 799 contracts, which relative to volume is approximately 15% below average. As this report is being compiled on September 11, December silver has made a new contract low at 18.570, which took out the previous contract low of 18.700. December silver remains on a short and intermediate term sell signal. Stand aside.

Australian dollar:

The September Australian dollar lost 37 pips on heavy volume of 243,536 contracts..Volume traded on September 10 was the highest of 2014 and took out the high of 235,445 contracts traded on September 9.On September 10, total open interest increased by a massive 14,347 contracts, which relative to volume is approximately 130% above average meaning that heavy numbers of new short sellers were entering the market and driving prices to a new low for the move (91.10).

As this report is being compiled on September 11, the September Australian dollar is trading 43 pips lower and has made another new low for the move at 90.90 on heavy volume. On September 5, the September Australian dollar made its high for the move at 93.98 and has fallen approximately 3 cents in just a few days. According to the most recent Commitments of Traders report released last Friday, leveraged funds were long by ratio of 3.54:1. It will be interesting to see tomorrow’s report and whether this large net long position has been cut significantly. If not, the Aussie will likely continue to move lower. The Australian dollar remains on a short and intermediate term sell signal. Stand aside.

Cotton:

December cotton gained 1.35 cents on heavy volume of 35,968 contracts.Volume was the strongest since June 17 when 38,538 contracts were traded and December cotton closed at 76.32. On September 10, total open interest increased by a massive 2,207, which relative to volume is approximately 135% above average meaning that aggressive new longs were entering the market in heavy numbers and driving prices to a new high for the move (67.39).Yesterday, the December 2014- March 2015 spread widened 46 points with December at an 81 point premium to March 2015 by the close.

As this report is being compiled on September 11, December cotton is trading 82 points higher and has made a new high for the move at 68.18, which takes out the August 27 high of 67.72. Additionally, the spread between December 2014 and March, May, and July 2015 continues to widen.Combined with the massive increase of open interest in yesterday’s trading on heavy volume and the spread widening significantly, cotton prices looks to continue their advance. As we said in yesterday’s report, for cotton to continue its advance, the daily low must be above OIA’s key pivot point of 65.74. This occurred on September 11..Also, we suggested that clients take a look at a bull spreading December 2014 against March, or May 2015.

Cocoa:

December cocoa lost $16.00 on volume of 18,499 contracts. Total open interest declined by a massive 2,056 contracts, which relative to volume is approximately 320% above average meaning that liquidation was off the charts heavy. From September 5 through September 10, open interest has declined every day and totals 5,039 contracts while December cocoa has declined by $69.00. This is perfectly normal in the early stages of up bear market when longs begin to liquidate as prices move lower.

What we have not seen is open interest increase on price declines, which would indicate that market participants are becoming bearish.As this report is being compiled on September 11, December cocoa has made another new low at 3019,which is the lowest print since May 27 (3002) and has closed at 3028. On September 5, December cocoa generated a short-term sell signal and an intermediate term sell signal on September 8. We have been waiting for a rally before recommending bearish positions. Unfortunately, cocoa has headed straight down. Stand aside.

Coffee: December coffee will generate a short-term sell signal on September 11.

December coffee lost 11.35 cents on volume of 28,207 contracts.Remarkably, volume was light considering the magnitude of the decline. For example, volume was the highest since August 20 when December coffee advanced 2.80 cents on volume of 35,144 contracts and total open interest declined by 6,522 contracts. The range on August 20 was just 6.45 cents while the range on September 10 was 13.55 cents. In short, the range on September 10 was twice that of August 20 yet volume on August 20 was considerably greater than September 10.

On September 10, total open interest increased by 520 contracts, which relative to volume is approximately 25% below average.The March 2015 contract lost 363 of open interest, which makes the total open interest increased more impressive (bearish). September 10 was the 4th day in a row that open interest increased as prices declined. From September 5 through September 10, total open interest has increased by 1,504 contracts while December coffee has declined by 21.20 cents.

Coffee is near a critical juncture according to our protocols. For example, if coffee makes a daily high below 1.8415, the market will continue lower. However, the most critical pivot point is 1.8170, and if the high for the day is below this pivot point, an intermediate term sell signal would be generated. According to the most recent Commitments of Traders report, we know that managed money is long coffee by ratio of 8.34:1, and there has been no liquidation in total open interest. At this juncture, we believe there are many speculative longs who have not liquidated and will be forced to as prices move lower. It will be interesting what tomorrow’s COT report says about coffee tomorrow, and we will provide an analysis of this in the upcoming September 14 Weekend Wrap. Stand aside.