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Soybeans:

November soybeans advanced 4.25 cents on volume of 170,952 contracts. Volume increased from September 12 when November soybeans advanced 3.75 cents on volume of 145,456 contracts and total open interest increased by 773 contracts. On September 15, total open interest increased by a massive 13,499 contracts, which relative to volume is approximately 225% above average meaning that new longs were aggressively and heavily entering the market and driving prices to a new high for the move of 10.02 1/4. Open interest increased across the board from November 2014 through July 2016, however the November 2015 contract lost 1 of open interest.

It is apparent that the short sellers on September 15 entered positions at the right time because on September 16, November soybeans are trading 7.75 cents lower and have not taken out yesterday’s high.As we have said before, soybeans will not bottom until managed money assumes a net short position. In the latest COT report, managed money is long by ratio of 1.10:1, and this is down from the previous week of 1.24:1 and the ratio of 2 weeks ago of 1.28:1. In short, managed money continues to reduce long positions as prices move lower. We think there will be a terrific opportunities in soybeans down the road, but the impact of a much larger crop has to be digested by the market. Stand aside.

Soybean oil:

December soybean oil advanced 70 points on volume of 118,922 contracts. Total open interest declined by 4,027 contracts, which relative to volume is approximately 35% above average meaning that liquidation was reasonably heavy on the advance. The October contract lost 2,880 of open interest, December – 4,372. As this report is being compiled on September 16, December soybean oil is trading 52 points lower following soybeans lower. As mentioned in yesterday’s report, December soybean oil must make a daily low above OIA’s key pivot point, before generating a short term buy signal. Yesterday’s pivot point was 32.98 and the pivot point for September 16 is 33.04, above today’s low of 32.85. If soybeans continue to trade weakly, it will be difficult for soybean oil to continue its rally. Stand aside.

Corn:

December corn advanced 4.50 cents on volume of 137,630 contracts. Total open interest increased by 4,464 contracts, which relative to volume is approximately the 25% above average meaning that new longs were entering the market at an above average pace and driving prices to a high of 3.43 1/2. The December 2014 through December 2016 contracts all gained open interest, with the exception of September 2015, which lost 97 of open interest. As this report is being compiled on September 16, December corn is trading 2.50 cents lower after making a new high for the move at 3.50 1/2, which is the highest print since 3.58 made on September 8. Like soybeans, we do not believe corn will bottom until managed money has assumed a net short position. Stand aside.

Chicago wheat:

December Chicago wheat lost 1.75 cents on volume of 53,822 contracts. Total open interest declined by 552 contracts, which relative to volume is approximately 50% below average. The December contract lost 211 of open interest, March 2015 -743. Yesterday, December Chicago wheat made a new contract low at 4.96, and as this report is being compiled on September 16 has made another new contract low of 4.91. Stand aside.

Kansas City wheat:

December Kansas City wheat lost 7.00 cents on volume of 18,404 contracts. Total open interest increased by a massive 2,061 contracts, which relative to volume is approximately 360% above average meaning that aggressive new short sellers were heavily entering the market and driving prices to new contract low (5.85 1/4). Open interest increases were across the board with the December 2014 through March 2016 contracts all gaining open interest. As this report is being compiled on September 16, December Kansas City wheat has made another new contract low at 5.80. The market is in the process of blowing out the hefty number of managed money longs. Stand aside.

WTI crude oil:

October WTI crude oil advanced 65 cents on volume of 534,680 contracts. Total open interest declined by 7,487 contracts, which relative to volume is approximately 45% less than average. The October contract accounted for loss of 18,055 of open interest.Yesterday, October WTI made a low of $90.63, which is above the low for the move of 90.43 made on September 11. WTI proceeded to rally from the low to close positively. As this report is being compiled on September 16, October WTI is trading $2.10 higher while the November Brent contract is trading +$1.26.October WTI will generate a short-term buy signal, if the low the day is above OIA’s key pivot point of 94.96. Until this occurs, we recommend a stand aside posture. Beginning with the Weekend Wrap of September 14, we have been warning clients that WTI was not as bearish as people were making it out to be.

From the September 14 Weekend Wrap: 

“We want to bring your attention that the inversion in the front months of WTI versus the back months continues despite the sharp fall in WTI prices. This is bullish. Additionally, open interest action from the August 8 high of 97.35 through the September 11 low of 89.56 (basis the November contract) is positive. For example, from August 8 through September 11, November WTI prices fell $4.56 while total open interest declined by 24,494 contracts. This is healthy and when prices are declining. In short, WTI prices have been declining due to liquidation, not from new short sellers. We are not calling for a bottom because we do not predict the future. However WTI is not as bearish as it may appear on the surface.”

Natural gas:

October natural gas advanced 7.4 cents on heavier than normal volume of 328,354 contracts. Total open interest declined by 4,878 contracts, which relative to volume is approximately 40% less than average. However, an open interest decline on a price advance is bearish.The October contract accounted for loss of 19,089 of open interest and there was insufficient open interest increases in the forward months to offset the decline in the October contract. This is the second day since September 11 that open interest action has not been congruent with a price action. As this report is being compiled on September 16, October natural gas is trading 6.2 cents higher and has made a daily high of 3.997, which is the highest print since 3.994 made on September 10. Natural gas continues to exhibit choppy trading, and it may take a cold spell to shake it out of its range bound activity. October natural gas remains on a short and intermediate term sell signal. Stand aside.

Cotton:

December cotton lost 2.16 cents on volume of 26,081 contracts. Volume increased from September 12 when December cotton lost 9 points on volume of 24,101 contracts and total open interest increased by 1,301 contracts. On September 15, total open interest declined by a massive 2,995 contracts, which relative to volume is approximately 340 percent above average meaning that liquidation was off the charts heavy. The December contract accounted for loss of 2,251, March 2015 -808.

The massive open interest decline in yesterday’s trading is a healthy development for cotton considering that open interest increases have been consistent since September 8 when cotton began its advance of 74 points on volume of 9,293 contracts and total open interest increased by 860 contracts. As this report is being compiled on September 16, December cotton is trading 34 points lower and has made a daily low of 65.26, which takes out the most recent previous low of 65.33 made on September 10.For December cotton to resume its uptrend, the low the day must be above OIA’s key pivot point of 65.93. December cotton remains on a short-term buy signal, but an intermediate term sell signal. Continue to stand aside.

Cocoa:

December cocoa advanced $4.00 on volume of 15,744 contracts. Total open interest declined by a hefty 1132 contracts, which relative to volume is approximately 210% above average meaning that liquidation was very heavy on cocoa’s modest advance.From September 5 through September 15, open interest has declined every day and totals 10,284 contracts while December cocoa has declined by $75.00. Cocoa has been unable to rally and therefore we continue to recommend a stand aside posture.

Coffee:

December coffee lost 2.35 cents on volume of 14,992 contracts. Total open interest declined by 1,021 contracts, which relative to volume is approximately 170% above average meaning that liquidation was heavy on yesterday’s decline. The December contract accounted for loss of 1,427 of open interest. Yesterday, was the first time since August 22 when open interest declined as prices declined. On August 22, December coffee lost 2.25 cents and total open interest declined by 752 contracts. In short, it appears that market participants are beginning to throw in the towel on coffee, which is healthy considering that managed money is long coffee by ratio of 6.84:1. As this report is being compiled on September 16, December coffee has closed at 1.8525, up 3.05 cents from yesterday’s close.We think coffee has terrific upside possibilities, but the market needs to work off the excessive long position held by speculators. December coffee remains on a short-term sell signal, but an intermediate term buy signal. Stand aside.