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This week’s grain export sales from the USDA report will be released on September 5 due to the Labor Day holiday.

We will provide reports on the major currencies in the September 4 report.

Soybeans:

November soybeans lost 12.00 cents on volume of 158,975 contracts. Volume declined from September 2 when November soybeans advanced 7.75 cents on volume of 164,437 contracts and total open interest increased by 6,710 contracts. On September 3, total open interest increased by 5,453 contracts, which relative to volume is approximately 40% above average meaning new short sellers were aggressively entering the market and driving prices to a new contract low (10.12 1/2).The September contract lost 202 of open interest and the November 2014 through March 2015 contracts all gained open interest. As this report is being compiled on September 4, November soybeans are trading 14.50 lower and have made a new contract low at 10.01 1/4. The dollar is sharply higher due primarily to the collapse of the euro and this is putting additional pressure on soybeans. Unless there is an early frost, which could cause a sharp rally, the trend is lower. Soybeans have support in the low $9.00 range, and the first indication that soybeans are near a bottom will be when managed money assumes a net short position. Stand aside if not short from higher levels.

Corn:

December corn lost 11.75 cents on heavier than normal volume of 252,119 contracts. Volume was the strongest since August 28 when December corn advanced 4.25 on volume of 262,810 contracts and total open interest declined by 16,946 contracts. On September 3, total open interest increased by a massive 14,213 contracts, which relative to volume is approximately 120% above average meaning that new short sellers were heavily entering the market and driving prices to a new contract low (3.51 3/4). As this report is being compiled on September 4, December corn is trading 6.25 cents lower and has made another new contract low of 3.43 3/4. Like soybeans, corn is not likely to find a bottom until managed money assumes a net short position. Stand aside unless short from higher levels.

Chicago wheat:

December Chicago wheat lost 19.25 cents on volume of 116,346 contracts. Volume was nearly double that of September 2 when December Chicago wheat lost 8.50 on volume of 56,274 contracts and total open interest increased by 1,109 contracts. Additionally, volume was the highest since August 22 when December wheat advanced 6.75 cents on volume of 133,299 contracts and total open interest declined by 8,779 contracts. On September 3, total open interest increased by a massive 9,011 contracts, which relative to volume is approximately 210% above average meaning that new short sellers were entering the Chicago wheat market in huge numbers and driving prices to a new contract low (5.35). As this report is being compiled on September 4, December Chicago wheat is trading 3.50 lower and has made a new contract low at 5.27 1/2.

Live cattle:

December live cattle advanced 2.475 cents on huge volume of 78,529 contracts.Volume was the strongest since August 11 when cattle advanced 45 points on volume of 78,732 contracts and total open interest declined by 2,079 contracts. On September 3, total open interest increased by a massive 5,355 contracts, which relative to volume is approximately 175% above average meaning that new longs were aggressively entering the market and driving prices to a new high for the move (1.58200). The October contract lost 2,342 of open interest, which makes the total open interest increase more impressive (bullish). December 2014 through February 2016 contracts all gained open interest with the exception of the June 2015 contract which lost 12 lots.

In short, there was aggressive new buying across the board. However, on September 4, it appears that December cattle may have made a blow off high having reached a new contract high at 1.6800,which took out the previous contract high of 1.60200 made on July 28. However, the market has pulled back dramatically and thus far in the trading day has made a low of 1.56575. December cattle generated a short and intermediate term buy signal on September 2, but we continue to recommend a stand aside posture.

Lean hogs:

December lean hogs lost 30 points on volume of 51,195 contracts. Total open interest declined by 1,469 contracts, which relative to volume is average. The October contract accounted for loss of 3,744 of open interest. As this report is being compiled on September 4, December hogs are trading 95 points lower and have made a low of 91.150, which takes out yesterday’s low of 92.450, and the September 2 low of 92.275. December hogs generated a short-term buy signal on September 2, and after the generation of a buy signal, the market has a tendency to pullback from 1-3 days. September 4 is the second day of the pullback and we recommend waiting one more day before making a decision whether to enter bullish positions.

WTI crude oil:

October WTI crude oil advanced $2.66 on volume of 587,396 contracts. Volume fell from September 2 when October WTI lost $3.08 on volume of 665,311 contracts and total open interest increased by 3,739 contracts. On September 3, total open interest declined by 5,896 contracts, which relative to volume is approximately 50% below average. The October contract lost 16,972 of open interest. As this report is being compiled October WTI is trading down $1.07 and has made a daily high of 95.39, which is below yesterday’s high of 95.83.October WTI remains on a short and intermediate term sell signal.

Gasoline:

October gasoline advanced 7.70 cents on volume of 158,845 contracts.Volume increased from September 2 when October gasoline lost 7.99 cents on volume of 116,467 contracts and total open interest declined by only 360 contracts, which is dramatically below average.On September 3, total open interest increased by 129 contracts, which is minuscule and dramatically below average. We are becoming friendly to gasoline. Its price action has been very positive and the massive decline on September 2 on low volume accompanied by a minor decline of open interest indicates that gasoline has been beaten down to the point where a small amount of demand will send prices higher.In order for October gasoline to generate a short-term buy signal, the daily low must be above OIA’s key pivot point of $2.6159. The volatility in gasoline is very low right now which makes option purchases inexpensive. However, we recommend waiting until gasoline generates a short-term buy signal before considering bullish positions.

From the August 31 Weekend Wrap:

“The current ratio of 1.60:1 is extremely low historically and the previous low reading for 2014 occurred in the COT report of January 28, 2014 when managed money was long by ratio 2.12:1. We went back to the COT report of November 5, 2013  when December 2013 gasoline made a low that week of $2.4945 and the reading in the November 5 report showed managed money long by ratio of 2.88:1. Do not press the short side of gasoline.”

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 0.9 million barrels from the previous week. At 359.6 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Total motor gasoline inventories decreased by 2.3 million barrels last week, and are in the middle of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories increased by 0.6 million barrels last week but are below the lower limit of the average range for this time of year. Propane/propylene inventories rose 1.4 million barrels last week and are above the upper limit of the average range. Total commercial petroleum inventories increasedby 1.5 million barrels last week.

With the decline of 0.9 million barrels in the latest EIA report, WTI inventories have declined by 28.7 million barrels during the past 10 weeks. October crude oil made its low for the move at 92.50 on August 21, and despite the weakness of the market, the low has held. Stand aside.

Natural gas:  On September 3, October natural gas generated a short-term sell signal, which reverses the short-term buy signal of August 28. October natural gas remains on an intermediate term sell signal.

October natural gas lost 4.3 cents on volume of 246,895 contracts. Total open interest increased by 712 contracts which is minuscule and dramatically below average. The October contract accounted for loss of 5,394 of open interest.On August 28, October natural gas generated a short-term buy signal, and since then has acted poorly.For example, October natural gas closed below OIA’s key pivot point of $3.906 on September 2 and yesterday closed at 3.847, which is below the second key pivot point. Although total open interest has increased by 26,580 contracts between August 27 through August 29, when October natural gas advanced 11.6 cents, we have not seen a corresponding decline of open interest during September 2 and 3. This means there are market participants who are long at higher levels who have not liquidated. This will continue to pressure the market, and it appears likely that the contract low of 3.740 made July 28 will be tested. We have been advising a stand aside posture ever since natural gas generated its short-term buy signal.

The Energy Information Administration announced that working gas in storage was 2,709 Bcf as of Friday, August 29, 2014, according to EIA estimates. This represents a net increase of 79 Bcf from the previous week. Stocks were 471 Bcf less than last year at this time and 495 Bcf below the 5-year average of 3,204 Bcf. In the East Region, stocks were 228 Bcf below the 5-year average following net injections of 59 Bcf. Stocks in the Producing Region were 221 Bcf below the 5-year average of 1,042 Bcf after a net injection of 10 Bcf. Stocks in the West Region were 46 Bcf below the 5-year average after a net addition of 10 Bcf. At 2,709 Bcf, total working gas is below the 5-year historical range.

Gold:

December gold advanced $5.30 on volume of 120,408 contracts. Total open interest declined by 2,992 contracts, which relative to volume is average.As this report is being compiled on September 4 as the dollar index is trading sharply higher, December gold is trading $3.80 lower and has made a daily low of 1262.50, which is above the low for the move of 1261.90 made on September 3. December gold remains on a short and intermediate term sell signal.

Canadian dollar:

The September Canadian dollar advanced 33 pips on volume of 65,974 contracts. Total open interest declined by 878 contracts, which relative to volume is approximately 45% less than average. As this report is being compiled on September 4, the September Canadian dollar is trading 9 pips higher after making a new high for the move at 92.38. The September Canadian dollar remains on a short-term buy signal, but an intermediate term sell signal.

Australian dollar:

The September Australian dollar advanced 73 pips on volume of 130,172 contracts. Volume fell slightly from September 2 when the September Australian dollar lost 60 pips on volume of 136,282 contracts and total open interest declined by 5,948 contracts. On September 3, total open interest increased by 4,668 contracts, which relative to volume is approximately 40% above average, meaning that new longs were entering the market and driving prices higher. Although the Australian dollar has come close, it has not yet generated a short-term buy signal. For this to occur, the low of the day must be above OIA’s key pivot point of 93.30.

Coffee:

December coffee lost 7.15 cents on volume of 20,490 contracts. Volume declined from September 2 when December coffee advanced 8.25 cents and total open interest increased by 1,297 contracts.On September 3, total open interest increased by a massive 1,445 contracts, which relative to volume is approximately 185% above average meaning that new short sellers were entering the market in heavy numbers and driving prices lower (2.0105). We are perturbed by the market action of September 3, and it has all the earmarks of commercial selling. As this report is being compiled on September 4, December coffee has made a daily low of 1.9530, which takes out the low print of August 27 (1.9610). December coffee made its low today on heavy volume on the 15 minute chart of 2,389 contracts between 7:15 – 7:30 CST. Penetration of today’s low of 1.9530 should be used as an exit point for bullish positions.