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With the stock indices sharply lower on September 25, and the dollar sharply higher, commodities remain vulnerable to setbacks regardless of fundamentals.

Soybeans:

November soybeans gained 0.50 cents on volume of 171,232 contracts. Volume increased from September 23 when November soybeans lost 2.00 cents on volume of 142,862 contracts and total open interest increased by 216 contracts and November made a new contract low of $9.31.On September 24, total open interest increased by 3,509 contracts, which relative to volume is approximately 20% below average. However, the November contract lost 1630 of open interest, which makes the total open interest increase neutral. There was a battle between longs and shorts and neither side was able to move the market much by the close. As this report is being compiled on September 25, November soybeans are trading 10.75 cents lower and have made a new contract low at 9.22 1/2. We have been cautioning clients to avoid bottom picking and the down side momentum is strong. Further adding to the downdraft in soybeans on September 25 is a sharply lower equities market.

Export sales figures were nothing short of terrific, and the USDA reported that 2565.57 thousand metric tons were sold in the recent reporting week bringing total commitments to date of 1.029 billion bushels versus USDA estimates for the entire season, which ends on August 31, 2015 of 1.750 billion bushels. Remarkably, 61% of USDA projections for the season have already been committed and the season just started on September 1.The current sale is the highest for the season thus far and it appears that soybean sales have their best start since the 2008-2009 crop year.. At some point, robust sales will begin to impact soybeans positively, but at this juncture the market is focusing on the impending harvest and the very large crop.

Soybean oil: On September 24, November palm oil generated a short-term buy signal.

December soybean oil advanced 40 points on volume of 77,632 contracts. Total open interest increased by 368 contracts, which relative to volume is approximately 75% below average. However, the October contract lost 1,997 of open interest, December – 2247, which makes the minor increase of total open interest more impressive (bullish).As this report is being compiled on September 25, November soybeans trading are 1.08% lower and December soybean meal -1.10%. December soybean oil is trading – 0.03%, or nearly unchanged on the day.

This is a very positive performance on September 25 considering that most markets are trading sharply lower. Yesterday, we wrote about the relative strength of soybean oil over soybeans and soybean meal, and it appears that a short-term buy signal is imminent, especially since November palm oil generated a short-term buy signal on September 24. December soybean oil will generate a short-term buy signal when the low of the day is above OIA’s key pivot point for September 25 of 33.06.Until then, stand aside.

The USDA reported sales of 5.82 thousand metric tons of soybean oil bringing total commitments to date of 831.4 thousand metric tons versus USDA projections for the season, which ends on September 30 of 861.8 thousand metric tons.

Corn:

December corn advanced 4.00 cents on volume of 190,529 contracts. Volume advanced slightly from September 23 when December corn lost 4.75 cents on volume of 184,631 contracts and total open interest declined by 2,904 contracts. On September 24, total open interest increased by 1,236 contracts, which relative to volume is approximately 65% below average. The December contract accounted for loss of 4,953 of open interest, which makes the total open interest increase slightly bullish. Yesterday, December corn made a new contract low of 3.24 3/4 and remarkably has not taken out yesterday’s contract low during trading on September 25.December corn remains on a short and intermediate term sell signal. Stand aside.

The USDA reported corn sales of 836.4 thousand metric tons bringing total commitments to date for the season, which began on September 1 of 546.3 million bushels versus USDA projections for the season of 1.750 billion bushels.

Chicago wheat:

December Chicago wheat advanced 4.25 cents on relatively heavy volume of 106,497 contracts. Volume was the strongest since September 22 when December Chicago wheat advanced 2.25 cents on volume of 109,348 contracts and total open interest increased by 14,594 contracts. On September 24, total open interest declined by 5208 contracts, which relative to volume is approximately 80% above average meaning that liquidation was extremely heavy on the modest advance. The December contract lost 6,380 of open interest, March 2015 -408. As this report is being compiled on September 25, December wheat is trading 5.50 cents lower and has made a new contract low on September 25 of 4.66 1/4. December Chicago wheat remains on a short and intermediate term sell signal. Stand aside.

The USDA reported sales of wheat in all categories of 396.3 thousand metric tons bringing total commitments to date of 471.7 million bushels versus USDA projections for the season of 900 million bushels. This week’s number was disappointing. The current season ends on May 31, 2015.

WTI crude oil:

November WTI crude oil advanced $1.24 on fairly heavy volume of 636,691 contracts.Volume was the strongest since September 17 when WTI lost 46  cents on volume of 667,486 contracts and total open interest declined by 20,954. On September 24, total open interest declined by 1,510, which is minuscule and dramatically below average. The October contract lost 725 of open interest, November -6385, December -2953. Yesterday, November WTI made a high of 93.29, which is the highest print since 93.60 made on September 18.

As this report is being compiled on September 25, November WTI is trading 8 cents higher andha s made a daily high of 93.54. The performance of WTI is impressive on September 25 considering the sharply lower equity markets and the dollar index trading, sharply higher. We think the path of least resistance is higher for WTI, but November WTI will resume its downtrend if the high for the day is below OIA’s key pivot point of 92.40. November WTI will generate a short-term buy signal, if the low the day is above OIA’s key pivot point for September 25 of 94.01. Stand aside.

Natural gas:

November natural gas advanced 9.5 cents on volume of 224,049 contracts. Volume increased only slightly from September 23 when natural gas lost 3.4 cents on volume of 220,556 contracts and total open interest declined by 11,498 contracts. On September 24, open interest declined by 1856 contracts, which relative to volume is approximately 55% below average. The October contract accounted for loss of 6387 of open interest.The total open interest decline on the strong advance is bearish.

As this report is being compiled on September 25 after the release of the Energy Information Administration storage report, November natural gas is trading 2.5 cents higher and has taken out yesterday’s high of 3.975 with another new high of 3.997, which takes out the September 19 high of 3.990.The EIA storage report showed an increase of 97 Bcf, and the market is shrugging this off and working its way higher in spite of weak commodity markets. OIA has been an advocate of bull call spreads, and recommend that clients continue to hold this position. 

The Energy Information Administration announced that working gas in storage was 2,988 Bcf as of Friday, September 19, 2014, according to EIA estimates. This represents a net increase of 97 Bcf from the previous week. Stocks were 386 Bcf less than last year at this time and 426 Bcf below the 5-year average of 3,414 Bcf. In the East Region, stocks were 190 Bcf below the 5-year average following net injections of 66 Bcf. Stocks in the Producing Region were 192 Bcf below the 5-year average of 1,089 Bcf after a net injection of 31 Bcf. Stocks in the West Region were 44 Bcf below the 5-year average after no net change. At 2,988 Bcf, total working gas is below the 5-year historical range.

Dollar index:

The December dollar index advanced 37.6 points on volume of 31,114 contracts. Total open interest increased by 829 contracts, which relative to volume is average. Yesterday, the December dollar index broke out to a new high of 85.220, and took out the high made during the week of July 8, 2013.The December dollar index continues to make a new contract high on September 25 (85.615). On July 16, OIA announced that the dollar index generated a short and intermediate term buy signal. The dollar index is massively overbought, and can stay this way for an extended period of time. Stand aside.

Euro:

The December euro lost 78 pips on volume of 204,413 contracts. Total open interest increased by 2,498 contracts, which relative to volume is approximately 50% below average. The December euro made a new contract low of 1.2781 on September 24, and as this report is being compiled on September 25 has made another contract low at 1.2703. The December euro remains on a short and intermediate term sell signal. Stand aside.

10 year Treasury Note:

The December 10 year Treasury Note lost 8 points on light volume of 1,033,343 contracts. Total open interest increased by 55,095 contracts, which relative to volume is approximately 105% above average meaning that aggressive new short sellers were entering the market In heavy numbers and driving prices lower. As this report is being compiled on September 25, the December note is rallying 14 points, which is due to the sharply lower equity indices. Despite the move higher, the December note remains on a short and intermediate term sell signal.For the 10 year note to generate a short-term buy signal, the low for the day must be above OIA’s key pivot point of 125-200, and the high on September 25 is 124-240, which is below the September 17 high of 125-040. Stand aside.

Cotton: We are suspending coverage on cotton until we see a trading opportunity or a reversal of signals.

December cotton lost 1.26 cents on volume of 29,263 contracts. Volume exceeded that of September 22 when December cotton lost 1.80 cents on volume of 28,618 contracts and total open interest increased by 995 contracts. On September 24, total open interest declined only 127 contracts, which relative to volume is approximately 80% below average. The December contract accounted for loss of 2781 of open interest. Yesterday, December cotton made a new contract low at 61.02, and as this report is being compiled on September 25, December cotton has made another contract low at 60.83. December cotton remains on a short and intermediate term sell signal. Wait for a rally before considering bearish positions.

Cocoa:

December cocoa advanced $74.00 on heavy volume of 30,342 contracts. Volume was the highest since September 19 when December cocoa advanced 67.00 on volume of 30,852 contracts and total open interest increased by a massive 3,532 contracts. On September 24, total open interest declined by 404 contracts, which relative to volume is approximately 45% below average. The December contract accounted for loss of 701 of open interest, March 2015 -268. December cocoa made a new contract high at 3,380, and this has been taken out with another contract high on September 25 of 3,399. The action on September 24 was garden-variety profit taking after an extended advance. Although, we do not see the end of the cocoa bull market yet, it is overstretched and well overdue for correction. Before contemplating bullish positions wait for further correction lasting perhaps another 2 days. As this report is being compiled on September 25, December cocoa has closed at 3,333, down 38.00.

Coffee:

December coffee advanced 8.20 cents on volume of 22,252 contracts. Volume was the strongest since September 19 when December coffee lost 3.20 cents on volume of 22,557 contracts and total open interest declined by 1,388 contracts. On September 24, total open interest increased only 199 contracts, which relative to volume is approximately 50% below average. The December contract lost 433 of open interest, which makes the total open interest increase more impressive (bullish). The relatively low volume and mild increase of total open interest is a disappointment considering the magnitude of the advance on September 24. We have advised against long positions until coffee generates a short-term buy signal.As this report is being compiled on September 25, December coffee has closed down 6.80 cents. December coffee remains on a short and intermediate term sell signal. Stand aside.