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On September 11, the USDA will release the World Agriculture Supply Demand report (WASDE).

Soybeans:

November soybeans advanced 18.25 cents on heavier than normal volume of 181,524 contracts. Volume was the strongest since August 12 when November soybeans lost 13.75 cents on volume of 229,887 and total open interest increased by 2,150 contracts. On September 5, total open interest increased by 1,926 contracts, which relative to volume is approximately 50% below average. The September contract lost 94 of open interest, November -4700, which makes the total open interest increase more impressive (bullish). However, on September 8, November soybeans have reversed and are now trading 11.50 lower on the day. However, November has not taken out its contract low of 10.01 1/4.Unless there is a frost scare, the market will drift lower until the September 11 WASDE report to be released by the USDA. Stand aside unless short from higher levels.

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 Corn:

December corn advanced 9.50 cents on volume of 209,823 contracts. Total open interest declined by a massive 16,205 contracts, which relative to volume is approximately 210% above average meaning that liquidation was extremely heavy on the advance. This is bearish. The September contract lost 2,158 of open interest, December -15,402. As this report is being compiled on September 8, December corn is trading 4.75 cents lower and has not yet taken out the contract low at 3.43 3/4 made on September 4. Stand aside unless short from higher levels.

Chicago wheat:

December Chicago wheat gained 5.00 cents on volume of 69,249 contracts. Total open interest declined by 586 contracts, which relative to volume is approximately 55% less than average. The September contract accounted for loss of 967 of open interest. As this report is being compiled on September 8, December Chicago wheat is trading 4.25 cents lower and has made a new contract low on September 8 of 5.24 1/4, which takes out the previous contract low of 5.27 1/2 made on September 4. Stand aside unless short from higher levels.

Live cattle:

December live cattle gained 2.425 cents on healthy volume of 64,525 contracts. Volume shrank dramatically from September 4 when December live cattle advanced 50 points on volume of 129,713 contracts and total open interest declined by 6,843 contracts. On September 5, total open interest increased by 3,124 contracts, which relative to volume is approximately 75% above average meaning that aggressive new longs were entering the market in heavy numbers and driving prices to new contract high of 1.61200. The October contract lost 2,827 of open interest even though it advanced 2.70 cents. We think the safest way to trade cattle is through bull spreads. In this case, long October 2014 short December 2014 or February 2015.

Lean hogs:

December lean hogs advanced 3.00 cents (limit up) on volume of 54,894 contracts. Total open interest declined by 3,311 contracts, which relative to volume is approximately 140% above average meaning that liquidation was very heavy on the strong advance. The October contract lost 4,312 of open interest even though it advanced 2.97 cents. The open interest action in lean hogs since generating a short-term buy signal on September 2 has been disappointing to say the least. For example on September 2 December hogs advanced 1.40 cents and total open interest declined by 2,438 contracts. On September 4, August declined just 65 points on volume of 74,237 contracts and yet open interest declined by 3,714 contracts. The pattern is liquidation, regardless of whether the market advances or declines, which makes the advance suspect. Like cattle, we recommend trading hogs through bull spreads only: buying October 2014 and selling December 2014 or February 2015.

WTI crude oil:

October WTI crude oil lost $1.16 on volume of 508,858 contracts. Total open interest declined by only 419 contracts, which is minuscule and dramatically below average. The October contract accounted for loss of 7,174 of open interest. Last week, the 50 day moving average on the WTI continuation chart crossed below the 200 day moving average. However, the October contract has not made the across. As this report is being compiled on September 8, October cattle is trading $1.08 lower and has made a new low for the move at 91.80, which is the lowest print since February 5, 2014 (91.38). October WTI crude remains on a short and intermediate term sell signal. Stand aside unless short from higher levels.

Natural gas:

October natural gas lost 2.6 cents on volume of 168,116 contracts. Total open interest increased by 251 contracts, which is minuscule and dramatically below average. October contract accounted for loss of 4,563 of open interest. As this report is being compiled on September 8, October natural gas is trading 6.7 cents higher after making a low of 3.761, which takes out Friday’s low of 3.781 and is the lowest print since 3.760 made on August 18, which was only slightly above the low for the move of 3.740 made on July 28. If natural gas breaks below the July 28 print, the next area of support is the November 2013 low of 3.589, which was the lowest low since at least September 2011. In short, natural gas is currently in its value zone relative to its price of the past few years. Although, October natural gas is on a short and intermediate term sell signal, the change in backwardation is indicating that a short-term buy signal may not be far off.

From the September 7 Weekend Wrap:

“Although natural gas generated a short-term sell signal on September 3, we are seeing signs backwardation is occurring in the forward months and the prime example of it took place this past week as prices declined. For example, from September 2 through September 5, October natural gas lost 4.06% and November – 4.53%. However the January 2015 contract lost 5.82% and March 2015 -5.85% even though the January and March contracts sell at a premium to October and November. This tells us as fall and winter approaches, natural gas will likely trade at much higher prices.”

Gold:

December gold advanced 70 cents on volume of 116,401 contracts. Total open interest increased by 820 contracts, which relative to volume is approximately 60% below average. As this report is being compiled on September 8, December gold is trading sharply lower, down $13.50 has made a new low for the move at 1253.50, which is the lowest print since June 10 ($1252.80). The next level of support comes in at the 1240 level, when December gold made a low of 1241.70 on June 3 and a previous low of 1241.00 on January 30, 2014. December gold remains on a short and intermediate term sell signal. Stand aside.

Silver:

December silver gained 1.8 cents on very light volume of 27,755 contracts. Total open interest declined by 736 contracts, which relative to volume is average. As this report is being compiled on September 8, December silver is making a new low for the move at 18.930, down 22.1 cents. The dollar index is  making new contract highs and the euro is making new lows for the move along with the British pound. December silver remains on a short and intermediate term sell signal. Stand aside.

Australian dollar:

September Australian dollar gained 26 pips on volume of 93,307 contracts. Total open interest declined by 1,378 contracts, which relative to volume is approximately 40% below average. As this report is being compiled on September 8, the September Australian dollar is trading 87 pips lower and has made a daily low of 92.75, which is significantly below OIA’s key pivot point of 93.32. As we pointed out in the weekend report, in order for the Australian dollar to generate a short and intermediate term buy signal, the daily low must be above the pivot point. The Australian dollar is loaded with speculative longs, which should exert additional selling pressure in the days ahead. On September 5, the September Australian dollar made a high of 93.98, and the high on September 8 has been 93.70. Stand aside.

Cocoa: On September 8, December cocoa will generate an intermediate term sell signal after generating a short-term sell signal on September 5.

December cocoa lost $30.00 on volume of 22,569 contracts. Total open interest declined by a hefty 1,084 contracts, which relative to volume is approximately 75% above average meaning that liquidation was extremely heavy on the modest decline.As this report is being compiled on September 8, December cocoa has closed at 3,071, down $31.00. Cocoa has closed lower everyday since September 2. On September 5, December cocoa generated a short-term sell signal.Wait for a rally before initiating bearish positions.

Coffee:

December coffee lost 4.40 cents on light volume of 11,992 contracts. Total open interest increased by 56 contracts, which is minimal and dramatically below average. The December contract accounted for loss of 192 of open interest. Beginning on September 3, total open interest has been unimpressive and on September 3 was downright bearish having increased by 1,445 contracts when December coffee declined by 7.15 cents.It is apparent that speculative longs are not liquidating as prices move lower and this will exert additional selling pressure in coffee.

As stated in the September 3 report, we recommended using the September 4 low of 1.9530 as an exit point for bullish positions. As this report is being compiled on September 8, December coffee is trading 3.60 cents lower and has made a daily low of 1.9240, which is significantly below the exit point recommended in the September 3 report. Clients should be on the sidelines now. We think coffee will go higher, but the deflationary trend in commodities due to the sharply higher dollar also is pressuring coffee.

From the September 3 report:

“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.”