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On September 3, December Chicago wheat, December corn and November soybeans are making new contract lows.

Soybeans:

November soybeans advanced 7.75 cents on heavier than normal volume of 164,437 contracts. Volume was the highest since August 20 when November soybeans lost 14.75 cents on volume of 171,526 contracts and total open interest increased by 955 contracts. On September 2, total open interest increased by 6,710 contracts, which relative to volume is approximately 55% above average meaning that new longs were initiating positions at a significantly above average rate and driving prices higher (10.38).As this report is being compiled on September 3, November soybeans are trading 16.50 cents lower and have made a new contract low at 10.12 1/2, which takes out the previous contract low of 10.19 3/4 made on August 26. November soybeans remain on a short and intermediate term sell signal. Stand aside unless short from higher levels.

Soybean meal: 

December soybean meal advanced $9.30 on volume of 100,439 contracts. Total open interest increased by a massive 10,745 contracts, which relative to volume is approximately 300% above average, meaning that new longs were entering the market at an extremely high rate and driving prices to new highs for the move (362.00). This was the highest price since July 29 when December meal made a high of 360.20. The September contract lost 594 of open interest, October -750, which makes the total open interest increased more impressive (bullish). However, on September 3, December soybean meal has reversed dramatically and is trading $10.80 lower and made a daily low of 347.00.December soybean meal remains on a short and intermediate term sell signal. Stand aside.

Corn:

December corn lost 1.00 cent on volume of 131,255 contracts. Total open interest declined by 2,164 contracts, which relative to volume is approximately 35% below average. The September contract accounted for loss of 4,765 of open interest, December -1590. As this report is being compiled on September 3, December corn is trading 10.00 cents lower and has made a new contract low at 3.51 1/4, which takes out the previous contract low of 3.58. December corn remains on a short and intermediate term sell signal. Stand aside.

Chicago wheat:

December Chicago wheat lost 8.50 cents on volume of 56,274 contracts. Total open interest increased by 1,109 contracts, which relative to volume is approximately 20% below average. The September contract accounted for loss of 847 of open interest. As this report is being compiled on September 3, December Chicago wheat is trading 17.75 cents lower and has made a new contract low at 5.35, which takes out the previous contract low of 542 1/4 made on July 29. Due to the potential for an out break of major conflict in the Black Sea region, we continue to advise a stand aside posture.

Live cattle:  On September 2, December live cattle generated a short and intermediate term buy signal.

December live cattle advanced 1.575 cents on fairly heavy volume of 60,020 contracts.Volume was the strongest since August 13 when live cattle lost 1.125 cents on volume of 70,440 contracts and total open interest declined by 755 contracts. On September 2, open interest increased by only 368 contracts, which relative to volume is approximately 70% below average. In short the increase was a disappointment. The October contract accounted for loss of 4,330 of open interest, which makes the minor increase of open interest more impressive (bullish).We are disappointed that the October contract lost a significant amount of open interest even though it advanced 1.00 cent.

As this report is being compiled on September 3, December cattle is trading 1.250 cents higher and has made a new high for the move at 1.58200, which is the highest print since August 5 (1.57425). From August 21 Through September 3, December cattle has advanced every day with the exception of August 27. The market is overbought relative to its 20 day moving average of 1.51480 and the 50 day moving average of 1.53940.Now that cattle is on a short and intermediate term buy signal, the market should have a pullback, and this would be the opportunity to initiate bullish positions.

Lean hogs: On September 2, December lean hogs generated a short-term buy signal, but remains on an intermediate term sell signal.

December lean hogs advanced 1.40 cents on volume of 53,076 contracts. Total open interest declined by 2,438 contracts, which relative to volume is approximately 75% above average, meaning that liquidation was extremely heavy on the advance. This is bearish open interest action relative to the price advance. Most disturbing was that the October contract lost 6,096 of open interest even though it advanced 1.75 cents. As this report is being compiled on September 3, December hogs are trading 25 points lower and have made a daily low of 92.450, which is above yesterday’s low of 92.275. Today is the first day of the pullback, and we like to see another day or two of a correction before recommending bullish positions.

WTI crude oil: The Energy Information Administration report on crude oil inventories will not be released until tomorrow due to the Labor Day holiday.

October WTI crude oil lost $3.08 on volume of 665,311 contracts. Volume was only slightly above the trade on August 19 when October WTI lost 89 cents on volume of 664,771 contracts and total open interest declined by 34,059 contracts. Surprisingly, open interest increased only 3,739 contracts, which relative to volume is approximately 70% below average. We would’ve expected either a large open interest increase, or a major decline. Additionally, the October contract only lost 2,585 of open interest.

In our view, this indicates that large numbers of speculative longs have been washed out of the market and that new short sellers are reluctant to press the market at yesterday’s low of 92.68, which is 18 cents above the low for the move of 92.50 made on August 21. Keep in mind that the current net long position of manage money is long by a ratio of 4.01:1, which is the lowest since January 21, 2014 when managed money was long WTI crude oil by ratio of 4.21:1. As this report is being compiled on September 3, October WTI is trading $2.85 above yesterday’s close and has made a daily high of 95.83. October WTI remains on a short and intermediate term sell signal. Stand aside.

Natural gas:

October natural gas lost 17.5 cents on volume of 303,606 contracts. Volume was slightly above that of August 27 when October natural gas advanced 4.5 cents on volume of 301,253 contracts and total open interest increased by 10,048 contracts. On September 2, open interest declined only 2,334 contracts, which relative to volume is approximately 65% below average. The October contract lost 7,313 of open interest. We consider the minor decline of open interest on a very large decline to be bearish. The reason for this is that there was a large build of open interest as natural gas prices advanced.

For example from August 27 through August 29, October natural gas advanced 11.6 cents while total open interest increased by 26,580 contracts. In short, there are large numbers of speculative longs who are showing losses, but have not liquidated. This group will continue to exert selling pressure on the market, which will keep a lid on advances.As we said in the August 31 weekend report, a close below $3.906 and then 3.856 would be a sign the buy signal generated on August 28 was false. Yesterday, October natural gas closed at 3.890, below the first pivot point. As this report is being compiled on September 3, October natural gas is trading down 4.1 cents on low volume and has made a low for the day of 3.829. We advise a stand aside posture even though this is the second day of the pullback. We think there is a good chance that the buy signal is false.

From the August 31 Weekend Wrap:

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

Gold:

December gold lost $22.40 on heavy volume of 205,782 contracts.Volume was the strongest since August 15 when December gold lost $9.50 on volume of 203,490 contracts and total open interest declined by 3,116 contracts. On September 3, total open interest increased by 6,400 contracts, which relative to volume is approximately 20% above average. This is the first time we have seen a massive open interest increase when prices declined. This indicates that market participants are becoming increasingly bearish on gold. December gold made a new low for the move at 1263.10 and and this has been taken out on September 3 with another new low of 1261.90. December gold remains on a short and intermediate term sell signal. Stand aside.

Silver:

December silver lost 34 cents on volume of 56,203 contracts. Total open interest increased by 657 contracts, which relative to volume is approximately 50% below average. The September contract accounted for loss of 1,077 of open interest, which makes the total open interest increased more impressive (bearish). December silver remains on a short and intermediate term sell signal. Stand aside.

Euro:

September euro lost 8 pips on heavy volume of 229,920 contracts.Volume was the highest since June 12 when 347,446 contracts were traded and the September euro closed at 1.3568. On September 2 total open interest increased by 5,547 contracts, which relative to volume is average. The September euro made a new low for the move at 1.3111, and as this report is being compiled on September 3, yesterday’s low has not been taken out.Volume in yesterday’s trading was extremely high as it made a new low for the move, but traded in a narrow range. Often high volume on a new low can signal capitulation. The euro remains on a short and intermediate term sell signal.We advise against initiating new shorts at current levels.

Yen:

The September yen lost 93 pips on heavy volume of 185,217 contracts.Volume traded on September 2 took out August 1 when 184,680 contracts were traded and the September yen closed at .9760.On September 2, total open interest increased by 4,532 contracts, which relative to volume is approximately average. The September yen remains on a short and intermediate term sell signal. Stand aside

British pound:

September British pound lost 89 pips on heavy volume of 155,724 contracts.Volume was the strongest since August 13 when the September pound lost 1.25 cents on volume of 162,642 contracts and total open interest increased by 10,461 contracts. On September 2, total open interest increased by 4,853 contracts, which relative to volume is approximately 20% above average. The pound made a new low for the move at 1.6466 and this has been taken out on September 3 with another new low of 1.6439. The September pound remains on a short and intermediate term sell signal.Stand aside.

Canadian dollar:

The September Canadian dollar lost 44 pips on volume of 74,102 contracts.Volume was the strongest since August 27 when the September Canadian dollar advanced 95 pips on volume of 103,979 contracts and total open interest increased by 6,011 contracts. On September 2, total open interest declined by 4,624 contracts, which relative to volume is approximately 140% above average, meaning that liquidation was extremely heavy. We consider this to be positive due to the large open interest build on August 27.As this report is being compiled on September 3, the September Canadian dollar is trading 40 pips higher and has made a daily high of 91.96. The September Canadian dollar remains on a short-term buy signal, but an intermediate term sell signal. Stand aside. 

Australian dollar:

The September Australian dollar lost 60 pips on heavy volume of 136,282 contracts.Volume was the strongest since June 12 when 193,912 contracts were traded and the September Australian dollar closed at 93.62. On September 2, total open interest declined by 5,948 contracts, which relative to volume is approximately 65% above average meaning that liquidation was extremely heavy on the decline. This is healthy open interest action relative to the price decline. As this report is being compiled on September 3, the September Australian dollar is trading 70 pips higher and has made a daily high of 93.44, which is the highest print since 93.53 made on August 29.The Australian dollar remains on a short and intermediate term sell signal. Stand aside.

Cotton:

December cotton lost 1.26 cents on volume of 23,057 contracts. Total open interest increased by a massive 1,751 contracts, which relative to volume is approximately 210% above average meaning that new short sellers were heavily entering the market and driving prices to a new low for the move 65.05, which is above the low of 65.01 made on August 25. It is important to note that although the December contract lost 1.26  cents the March 2015 contract lost 1.73 cents and as a result the December contract closed at a 3 point premium to March 2015. This is potentially bullish. As this report is being compiled on September 3, December cotton is trading 59 points higher and has made a daily high of 66.17. Yesterday we advised the liquidation of bullish positions. Stand aside.

Coffee:

December coffee advanced 8.25 cents on heavy volume of 24,614 contracts. Volume edged out trading on August 27 when coffee advanced 70 points on volume of 24,326 contracts and total open interest declined by 395 contracts. On September 2, total open interest increased by a massive 1297 contracts, which relative to volume is approximately 110% above average, meaning that new longs were aggressively entering the market and driving prices to a new high for the move 2.0995, which is the highest print since August 1 (2.1110). As this report is being compiled on September 3, December coffee closed at $2.0230, down 7.15 cents. Maintain bullish positions.