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Soybeans:

November soybeans lost 14.50 cents on heavier than normal volume of 160,532 contracts. Volume was the strongest since September 16 when the November contract lost 8.75 cents on volume of 199,568 contracts and total open interest increased by 7,590 contracts. On September 19, total open interest increased by a massive 8,121 contracts, which relative to volume is approximately 100% above average meaning that aggressive new short sellers were entering the market and driving prices to new contract low (9.56). The November 2014 through July 2016 contracts all gained open interest. As this report is being compiled on September 22, November soybeans are trading 19.75 cents lower and have made a new contract low of 9.34 1/4. We have warned clients to stand aside and not pick a bottom. This market is likely to go much further to the downside than anyone thinks.

Corn:

December corn lost 6.75 cents on volume of 159,949 contracts. Total open interest increased by a massive 14,361 contracts, which relative to volume is approximately 250% above average meaning that aggressive new short sellers were heavily entering the market and driving prices to new contract low (3.31 1/2). As this report is being compiled on September 22, December corn is trading 2.25 cents lower and has already made another new contract low at 3.26 3/4. Like soybeans, do not attempt to pick a bottom because corn will likely move much lower than anyone thinks.

Chicago wheat:

December Chicago wheat lost 14.00 cents on volume of 70,695 contracts.Total open interest increased by 2,207 contracts, which relative to volume is approximately 20% above average. The December contract accounted for loss of 1,329 of open interest, which makes the total open interest increase more impressive (bearish). On Friday, December Chicago wheat made a contract low of 4.73 3/4, and as this report is being compiled on September 22 has made another contract low of 4.69 1/2. Stand aside.

WTI crude oil:

November WTI crude oil lost 33 cents on volume of 521,571 contracts. Total open interest declined by a massive 20,150 contracts, which relative to volume is approximately 50% above average meaning that liquidation was extremely heavy on the very modest decline. The October contract accounted for loss of 30,945 of open interest. As this report is being compiled on September 22, the October contract is trading down $1.01 and has made a daily low of 91.20 and the November contract is trading $1.06 lower having made a daily low of 90.41. The October contract has not taken out the low for the move of 90.43 made on September 11 nor has it taken out the secondary low of 90.63 made on September 15.The Brent contract continues to display increasing weakness against WTI and as this report is being compiled is trading $1.90 lower and has made a new contract low of 96.38.

The fascinating aspect of WTI trading has been the absence of open interest increases on price declines and inversion of front versus back months, which continues to widen as WTI prices decline. These two factors are bullish, and tempers our bearishness. November WTI remains on a short and intermediate term sell signal.

Natural gas:

October natural gas lost 7.2 cents on light volume of 235,832 contracts. Volume was the weakest since September 10 when October natural gas lost 3.00 cents on volume of 195,538 contracts and total open interest declined by 3,360 contracts. On September 19, total open interest declined by 1,818 contracts, which relative to volume is approximately 55% below average. The October contract accounted for loss of 6,503 of open interest. As this report is being compiled on September 22, October natural gas is trading 1.1 cents lower and has made a daily low of 3.804, which is the lowest print since September 12 (3.786). October natural gas will reverse the buy signal generated on September 17 if the high for the day is below OIA’s key pivot point of $3.851. If bull call spreads were initiated on the setback, continue to hold these, and exit the position upon the penetration of the July 28 low of $3.740. As we have said before, it may take a cold snap to ratchet natural gas prices significantly higher.

Euro:

The December euro lost 80 pips on volume of 218,882 contracts. Total open interest increased by a hefty 7,095 contracts, which relative to volume is approximately 30% above average meaning that new short sellers were entering the market in fairly heavy numbers and driving prices to new contract low (1.2835). As this report is being compiled on September 22, the December euro is trading 6 pips lower and has made a another contract low at 1.2824. The euro remains on a short and intermediate term sell signal. Stand aside.

British pound:

The December British pound lost 62 pips on heavy volume of 260,904 contracts.Volume was the strongest since September 10 when the pound advanced 1.11 cents on volume of 334,381 contracts and total open interest declined by 5,430 contracts. On September 19, total open interest increased only 106 contracts. In essence it appears that new longs and shorts were replacing old longs and shorts which explains the very minor open interest increase.The pound made a high of 1.6515, and when it became apparent that the United Kingdom would stay united with Scotland, the market began the sell off. It was a “buy on the rumor sell on the news” event. As this report is being compiled on September 22, the December pound is trading 41 pips higher and has made a high of 1.6353. The December pound remains on a short and intermediate term sell signal. Stand aside.

Cotton:  On September 22, December cotton will generate a short-term sell signal, which reverses the short-term buy signal of August 2 December cotton remains on an intermediate term sell signal. 

December cotton lost 66 points on volume of 23,796 contracts. Total open interest declined by 550 contracts, which relative to volume is approximately 10% less than average. The December contract accounted for loss of 1,978 of open interest.As this report is being compiled on September 22, December cotton is trading 1.91 cents lower and has made a new low for the move at 62.22, which is the lowest print since August 1 (62.02).

As stated in the September 18 report, in order for December cotton to reverse the short-term buy signal August 22 the high of the day had to be below OIA’s key pivot point of 64.67. As this report is being compiled, the high of the day is 64.40, below the pivot point and therefore December cotton will generate a short-term sell signal on September 22. Additionally, on September 17, we reiterated to clients that the low of the day had to be above OIA’s key pivot point (65.93) in order for the uptrend to resume. This never occurred. During this time, we advised clients to remain on the sidelines.

From the September 18 report:

“As this report is being compiled on September 19, December cotton is trading 1.18 cents lower and has made a new low for the move at 63.70.December cotton is trading below OIA’s key pivot point of 64.67, and in order for December cotton to reverse the buy signal of August 22, the high of the day must be below the pivot point. The high on September 19 is 65.12. Stand aside.”

From the September 17 report:

“We said in the September 15 report that December cotton had to make a low above OIA’s key pivot point in order for the uptrend to resume, and the market has been unable to do this. As a result, we have recommended a stand aside posture.It now appears likely that December cotton may be on the verge of generating a short-term sell signal, which would reverse the short-term buy signal generated on August 22.”

Cocoa: On September 19, December Cocoa generated a short-term buy signal after generating an intermediate term buy signal on September 18.

December cocoa advanced $67.00 on heavy volume of 30,852 contracts. Volume was the strongest since September 17 when December cocoa advanced $83.00 on volume of 33,642 contracts and total open interest increased by 2,656 contracts. On September 19, total open interest increased again, this time by a massive 3,532 contracts, which relative to volume is approximately 360% above average, which is off the charts and means that new longs were aggressively and heavily entering the market and driving prices to a new high for the move (3,273).There were open interest increases across the board with the exception of the September 2015 contract which lost 17 of open interest. As this report is being compiled on September 22, December cocoa is trading $70.00 higher and has made a new high for the move at 3,339, which takes out its former contract high of 3,300 made on August 27.Additionally, the December contract has a new closing high of 3,328

Usually after the generation of buy signals, the market has a tendency to pullback from 1-3 days and this is the opportunity to initiate bullish positions, which we recommend. However, the pullback may be short-lived and possibly last only one day.

Coffee: December coffee will generate an intermediate term sell signal on September 22. It generated a short-term sell signal on September 11

December coffee lost 3.20 cents on volume of 22,557 contracts. Volume was the heaviest since September 11 when December coffee advanced 4.20 cents on volume of 28,179 contracts and total open interest declined by 2,621 contracts. On September 19, total open interest declined by a massive 1,388, which relative to volume is approximately 140% above average meaning that liquidation was heavy on the decline.The December contract accounted for loss of 1,803 of open interest.

As pointed out in the September 15 report, we said coffee needed to shed large speculative long positions, and saw evidence of this in the latest COT report. The report showed that managed money was long coffee by a ratio of 5.01:1, which is the lowest since the COT report date of July 22 when managed money was long coffee by ratio of 4.64:1.

As this report is being compiled on September 22, December coffee is trading 40 points higher and has made a daily low of 1.7640, which was the low of the day on September 19. This is the lowest print for the December contract since July 23 (1.7035).

From the September 15 report:  

“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.”