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On September 30, the USDA will release its quarterly grain stocks report.

Soybeans:

November soybeans lost 14.00 cents on relatively heavy volume of 209,930 contracts. Volume was the strongest since September 22 when November soybeans lost 18.75 on volume of 229,769 contracts and total open interest increased by 9,145 contracts. On September 25, open interest increased again, this time by 9,212 contracts, which relative to volume is approximately 65% above average meaning that aggressive new short sellers were entering the market in heavy numbers and driving prices to a new contract low (9.22 1/4). As this report is being compiled on September 26, November soybeans are trading 6.25 cents lower and have made another contract low of 9.10 3/4. Remarkably, from August 25 through September 25, open interest has increased every day. It will be interesting to see whether managed money has increased their net short position and whether commercial interests have increased their net long position. Do not attempt to take a bottom. Stand aside

Soybean oil:

December soybean oil lost 2 points on heavy volume of 126,544 contracts.Volume was the strongest since July 1 when 130,095 contracts were traded and December soybean oil closed at 39.23.Additionally, volume took out the previous high of 118,922 contracts made on September 15 when December soybean oil advanced 70 points. On September 25, total open interest increased by 785 contracts, which relative to volume is approximately 65% below average. However, the October contract lost 2,667 of open interest, December -386, which makes the minor increase of total open interest more impressive (bullish).

Yesterday, December soybean oil made a high of 33.18, which is the highest print since September 18 (33.75). We again want to emphasize that spread action in soybean oil, which indicates a potentially strong move higher may occur in the coming months. We encourage clients to look at the term structure of delivery months, especially from May 2015 through December 2015. It is apparent the spread between these months is flattening after being strongly in contango. For example, yesterday May 2015 soybean oil closed at 33.37 and the December 2015 contract closed at 33.37 as well. This is the highest close for the spread since July 16 when May 2015 closed at a 4 point premium to December 2015. On July 16, December soybean oil closed at 36.99, which is approximately 5.00 cents above the current price on September 26.

The major barrier to a bull market in soybean oil is soybeans, and the intense bear market in beans will serve to delay a significant move higher in soybean oil. If clients are looking to position themselves for an eventual bottom in soybeans, they should track the soybean oil spreads, and look to initiate spread positions when it appears soybeans are in a bottoming process. This may not occur until the harvest is well underway. December soybean oil remains on a short and intermediate term sell signal. Stand aside.

Corn:

December corn lost 3.50 cents on volume of 154,828 contracts. Total open interest increased by a massive 13,318 contracts, which relative to volume is approximately 240% above average meaning that aggressive new short sellers were entering the market in heavy numbers and driving prices lower (3.25 1/4), but this was above the contract low of 3.24 3/4 made on September 24.The open interest increases were across the board and it was the July 2015 contract that lost 185 of open interest. In short, market participants are getting extremely bearish at the very low-end of the trading range. As this report is being compiled on September 26, December corn is trading 1.75 lower and has made a new contract low of 3.23. Stand aside.

Chicago wheat:

December Chicago wheat lost 6.25 cents on volume of 89,900 contracts. Total open interest increased by a hefty 6,237 contracts, which relative to volume is approximately 185% above average meaning that aggressive new short sellers were entering the market in heavy numbers and driving prices to a new contract low (4.66 1/4). Open interest increases were across the board and the July 2015 contract lost 91 of open interest. As this report is being compiled on September 26, December Chicago wheat is trading 0.25 cents lower and has not taken out yesterday’s contract low. Stand aside.

WTI crude oil:

November WTI crude oil lost 27 cents on volume of 530,887 contracts. Volume fell precipitously from September 24 when November WTI advanced $1.24 volume of 636,691 and total open interest declined by 1,510 contracts. On September 25, total open interest declined by 7,015 contracts, which relative to volume is approximately 45% less than average. The November contract lost 5,511 of open interest, December – 1,058. As this report is being compiled on September 26, November WTI is trading 93 cents higher while the November Brent contract is trading 6 cents lower. The action in WTI has been far more positive than Brent, but WTI may not make be able to make a significant move higher until the performance of Brent improves. Despite November WTI being on a short and intermediate term sell signal, we advise against bearish positions. Stand aside.

Natural gas:

November natural gas advanced 4.9 cents on heavy volume of 336,126 contracts. Volume was stronger than September 18 when natural gas lost 10.3 cents on volume of 311,120 contracts and total open interest declined by 25,445. On September 25, total open interest declined by a substantial 12,828 contracts, which relative to volume is approximately 50% above average. The October contract accounted for loss of 16,751 of open interest. Although, we definitely like the price action of natural gas, we do not like the performance of open interest.In just 2 days, November natural gas has advanced 14.4 cents, yet total open interest has declined 14,684 contracts. This is bearish open interest action relative to the price advance and indicates that market participants do not believe in the rally.

For November natural gas to continue the rally, it must make a daily low above 2 of OIA’s key pivot points: $4.013 and 4.039. If the November contract is unable to accomplish this, the market will trade sideways to lower. It is positive that November natural gas was able to close (4.014) above the first pivot point, but clearly natural gas has more work to do before we see a significant move higher. As we have said before, a cold snap would do wonders for natural gas prices. November natural gas remains on a short term buy signal, but an intermediate term sell signal. Maintain bull call spreads.

10 year Treasury Note:

The December Treasury Note advanced 15 points on volume of 1,425,955 contracts.Volume was the strongest since September 17 when 1,690,272 contracts were traded and the December note closed at 124-0 15. On September 25, total open interest increased by a massive 72,211 contracts, which relative to volume is approximately 100% above average meaning that new longs were heavily entering the market and driving prices to the daily high of 124-270, which is the highest print since September 9 (124-295). As this report is being compiled on September 26, the December note is trading 11 points lower and has made a daily low of 124-110. Normally, we would suggest using yesterday’s high as a point to initiate bearish positions, however, we think equity indices are heading lower, perhaps sharply so and this will have a tendency to boost note prices.The December note remains on a short and intermediate term sell signal.

S&P 500 E mini: The December S&P 500 E mini will generate a short-term sell signal, if the high for the day is below OIA’s September 26 pivot point of 1965.80. The uptrend will resume if the low for the day is above OIA’s pivot point for September 26 of 1982.20.

We think equity indices are headed lower. 

Dollar index:

The December dollar index advanced 14.8 points on volume of 39,326 contracts. Total open interest declined by 176 contracts, which relative to volume is approximately 70% below average. Yesterday, the December dollar index made a new contract high of 85.615 and as this report is being compiled on September 26 has made another contract high of 85.800, up 48.2 points. The massive increase in the dollar index ever since OIA announced the short and intermediate term buy signal on July 16 will begin to negatively impact the earnings of multinational corporations, which will pressure the major indices. The dollar index is massively overbought, and we recommend a stand aside posture.

Cocoa:

December cocoa lost $38.00 on volume of 22,717 contracts. Volume declined substantially from September 24 when December cocoa advanced 74.00 on volume of 30,342 contracts and total open interest declined by 404 contracts. On September 25, total open interest increased by 178 contracts, which relative to volume is approximately 55% below average. However, the December contract lost 823 of open interest, which makes the total open interest increase somewhat bearish.Yesterday, December cocoa made a new contract high of 3,399, but sold off to close lower. Conceivably, cocoa put in a temporary top yesterday, but we tend to think the market will make new highs after correcting the excesses of the past several days.

As this report is being compiled on September 26, December cocoa has closed at 3,311, down $22.00. The market remains massively overbought, and with very large open interest increases, cocoa should have a significant corrective move. December cocoa remains on a short and intermediate term buy signal. Stand aside.

Coffee:

December coffee lost 6.80 cents on volume of 16,974 contracts. Volume shrank considerably from September 24 when December coffee advanced 8.20 cents on volume of 22,252 contracts and total open interest increased by a disappointing 199 contracts.On September 25, total open interest increased by a massive 1,283 contracts, which relative to volume is approximately 210% above average meaning that aggressive new short sellers were entering the market in heavy numbers and driving prices lower (1.7945). As this report is being compiled on September 26, December coffee has closed at 1.8605, up 3.75 cents. December coffee remains on a short and intermediate term sell signal. Stand aside.