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The USDA will release its World Agriculture Supply Demand report on September 11.

Soybeans:

November soybeans lost 13.00 cents on light volume of 129,154 contracts. Volume was the weakest since August 29 when November soybeans lost 4.50 cents on volume of 96,583 contracts and total open interest increased by 8,525 contracts. On September 8, total open interest increased by 1,885 contracts, which relative to volume is approximately 40% less than average. The September contract accounted for loss and 87 of open interest. As this report is being compiled on September 9, November soybeans have broken decisively below the $10.00 level and trading 11.75 cents lower and made a new contract low of 9.92. Our downside target for November soybeans is the June 8, 2010 low of $8.96. This is not to say this is the ultimate low, and we are not saying that soybeans will attain this low, but with fundamentals being as bearish as they are the trend remains strongly lower. We are advising against the initiation of new short positions because there will be sporadic counter trend rallies that will shake loose speculative shorts. This will be the time to consider bearish positions.

As we commented in yesterday’s report, soybeans will continue to drift lower until the September 11 USDA report. Also, we think soybeans will not find a bottom until managed money has assumed a net short position. As of the latest Commitments of Traders report released last Friday, managed money was long soybeans by ratio of 1.24:1. November soybeans remain on a short and intermediate term sell signal. Stand aside unless short from higher levels.

Corn:

December corn lost 7.75 cents on light volume of 163,594 contracts. Volume shrank substantially from September 5 when December corn advanced 9.50 cents on volume of 209,823 contracts and total open interest declined by a massive 16,205 contracts. Additionally, volume was the weakest since September 2 when December corn lost 1.00 cent on volume of 131,255 contracts and total open interest declined by 2,164 contracts. On September 8, total open interest declined by 3,387 contracts, which relative to volume is approximately 20% below average. There was liquidation across the board with the September contract losing 500 of open interest, December -3,445, March 2015 -1,185, and May 2015 -672. As this report is being compiled on September 9, December corn is trading 3.50 lower and has made a new contract low at 3.43, which takes out the previous contract low of 3.43 3/4 made on September 4. Unless short from higher levels, stand aside.

Chicago wheat:

December Chicago wheat lost 1.75 cents on very light volume of 47,679 contracts. Based upon our review of the data, it appears that volume on September 8 was the lowest of 2014.On September 8, total open interest declined by 336 contracts, which relative to volume is approximately 65% less than average. However, there was liquidation across the board with the September 2014 contract losing 203 of open interest, December -352, March 2015 -569. Yesterday, December wheat made a new contract low of 5.24 1/4, and this has been taken out on September 9 with another contract low of 5.23 1/4.December Chicago wheat remains on a short and intermediate term sell signal. Unless short from higher levels, stand aside.

Live cattle:

December live cattle lost 7.5 points on heavy volume of 83,495 contracts. Volume was the heaviest since September 4 when December live cattle advanced 50 points on volume of 129,713 contracts and total open interest declined by 6843 contracts. On September 8, total open interest declined by 2,399 contracts, which relative to volume is average. The October contract lost 11,994 of open interest and there were open interest increases in the December 2014 through February 2016 contracts. However, the open interest increases in the forward months were not able to offset the decline in the October contract. As this report is being compiled on September 9, December live cattle has made a new contract high at 1.62500, which takes out yesterday’s contract high of 1.61400.As we have said in previous posts, the safest way to trade live cattle is through a bull spread: buying October 2014 and selling December 2014, or February 2015 contracts. The spread has not worked out well for the past 2 days, but if the market is to move higher, the October contract should begin to outperform the forward contracts.

Lean hogs:

December lean hogs lost 2.55 cents on volume of 71,720 contracts. Volume was the heaviest since September 4 when December hogs lost 65 points on volume of 74,237 contracts and total open interest declined by a massive 3,714 contracts. On September 8, total open interest increased by 623 contracts, which relative to volume is approximately 55% below average. However the December 2014 through October 2015 contracts all gained open interest, which offset the loss of the October contract of 5,286 of open interest. As we mentioned in yesterday’s report, the open interest action in hogs has been distinctly bearish even as the market works its way higher.Although the bull spread has not worked well for the past 2 days, if lean hogs are to continue to advance, the October contract should begin to outperform the forward contracts.

From the September 5 report:

“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.”

WTI crude oil:

October WTI crude oil lost 63 cents on heavier than normal volume of 600,325 contracts. Volume was the strongest since September 2 when October WTI lost $3.08 on volume of 665,311 contracts and total open interest declined by 2,334 contracts. On September 8, total open interest increased by a strong 14,717 contracts, which relative to volume is average. The October contract lost 10,694 of open interest, which makes the total open interest increased more impressive (bearish). Thehe large open interest increase is occurring just as October WTI made a new low for the move at 91.80, which is the lowest print since February 5, 2014 (91.38).  This suggests that speculators are getting bearish at the very low end of the trading range. Commercial short sellers rarely initiate short sales at the bottom of the move, and would likely be on the buy side. WTI crude oil generated a short-term sell signal on July 3 and an intermediate term sell signal on July 11. Unless short from higher levels, stand aside.

Natural gas:

October natural gas advanced 8.3 cents on volume of 232,840 contracts. Volume was the highest since September 4 when October natural gas lost 2.8 cents on volume of 252,536 contracts and total open interest increased by 3,131 contracts. On September 8, total open interest increased by 2,239 contracts, which relative to volume is approximately 50% below average. However, the October contract lost 8,961 of open interest, which makes the total open interest increased more impressive (bullish). Based upon yesterday’s reversal from the low of 3.761 through today’s trading when October natural gas is trading 12.8 cents higher, it appears that natural gas has a triple bottom in place dating back to July 28.

Interestingly, the number of days between the lows are just about equal. For example from the July 28 low of 3.740 to the August 18 low of 3.760 16 trading days separated the two lows. From August 18 through September 8, 15 trading days elapsed between the two lows. In short, it appears that natural gas may at the onset of a significant move higher. after making a triple bottom.

In order for October natural gas to generate a short-term buy signal, its daily low must be above OIA’s key pivot point of 3.955. There is one characteristic that separates the current move higher from the previous one: the spread between the front and back months is widening. This is bullish and we made a note of this in the September 7 Weekend Wrap. As this report is being compiled on September 9, October natural gas is trading 12.8 cents higher at $4.000. Once a buy signal is generated, the market should have a pullback lasting from 1-3 days and this will be the opportunity to initiate bullish positions. Stand aside until the buy signal has been generated.

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 lost $13.00 on surprisingly light volume of 129,649 contracts. Volume was the weakest since September 5 when December gold advanced 70 cents on volume of 116,401 contracts and total open interest increased by 820 contracts. On September 8, total open interest increased by a hefty 5,244 contracts, which relative to volume is approximately 55% above average meaning that new short sellers were entering the gold market in substantial numbers and driving prices to a new low for the move ($1252.10).As this report is being compiled on September 9, December gold has made another new low for the move at 1248.10 on low volume. December gold remains on a short and intermediate term sell signal. Stand aside.

Silver:

December silver lost 21.8 cents on surprisingly light volume of 31,262 contracts. Total open interest increased by 96 contracts. As this report is being compiled on September 9, December silver has made a new low for the move at $18.890, which is not far from its contract low of $18.700.December silver remains on a short and intermediate term sell signal. Stand aside.

Euro:

September euro lost 51 pips on heavy volume of 317,645 contracts.Volume was the strongest since September 4 when the September euro lost 2.08 cents on volume of 483,032 contracts and total open interest increased by 14,312 contracts. On September 8, total open interest increased again, this time by 13,083 contracts, which relative to volume is approximately 55% above average meaning that new short sellers were aggressively entering the euro currency in heavy numbers and driving it to a new low for the move 1.2882, which is close to its contract low of 1.2833. As this report is being compiled on September 9, the September euro is trading 8 pips higher after making another new low for the move at 1.2860. The euro is on a short and intermediate term sell signal. We have advised a stand aside posture due to our concern that a major counter trend rally could occur at any time.

British pound:

The September British pound lost 2.15 cents on heavy volume of 211,642 contracts. Volume was the strongest since June 12 when 337,633 contracts are traded and the September British pound closed at 1.6825. On September 8, total open interest declined by 4,945 contracts, which relative to volume is approximately 10% below average. As this report is being compiled on September 9, the September British pound is trading 31 pips lower and has made a new low for the move at 1.6059, which is a considerable distance from its contract low of 1.4846. The September British pound remains on a short and intermediate term sell signal. Stand aside. However, there may be an opportunity on the long side as the referendum on Scotland staying in the United Kingdom approaches. Stay tuned.

Canadian dollar: On September 8, the September Canadian dollar generated a short-term sell signal, which reversed the short-term buy signal of August 28. The September Canadian remains on an intermediate term sell signal.

The September Canadian dollar lost 67 pips on volume of 80,389 contracts.Volume was the strongest since August 27 when 103,979 contracts were traded and the September Canadian dollar closed at 92.21. On September 8, total open interest increased by 1,701 contracts, which relative to volume is approximately 20% below average, however the open interest increase confirms that new short sellers were entering the market and driving prices lower (91.03). As this report is being compiled on September 9, the September Canadian dollar is trading 32 pips lower and has made a new low for the move at 90.62, which is the lowest print since May 2 (90.62). Stand aside.

Australian dollar:

September Australian dollar lost 85 pips on volume of 133,296 contracts.Volume was the strongest since September 2 when 136,282 contracts are traded and the September Australian dollar closed at 92.65. On September 8, total open interest declined by 2,752 contracts, which relative to volume is approximately 20% below average. After reaching the high of 93.98 on September 5, the Australian dollar has collapsed approximately 2 cents through September 9. For a time, it looked as if the Australian dollar might generate a short and intermediate term buy signal, but was unable to make a low above OIA’s key pivot point of 93.32.The big problem with the Australian dollar is that managed money is long by ratio of 3.54:1, which is the highest ratio during the past several weeks. This means there are large numbers of longs that have yet to liquidate and will be forced to do so as prices continue to move lower. The Australian dollar remains on a short and intermediate term sell signal.Wait for a rally before initiating bearish positions.

From the September 7 Weekend Wrap:

“Australian dollar: If the September Australian dollar can make a daily low above OIA’s key pivot point of 93.32, a short and intermediate term buy signal will be generated.”

Yen:

September yen lost 73 pips on volume of 238,361 contracts.Volume was the strongest since June 11 when 234,784 contracts were traded and the September yen closed at .9772. On September 8, total open interest increased by a massive 15,720 contracts, which relative to volume is approximately 160% above average meaning that new short sellers were aggressively entering the end and driving prices to a new contract low of.9426. As this report is being compiled on September 9, the September yen has made another new contract low at.9392. The yen remains on a short and intermediate term sell signal. Stand aside.

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

December cocoa lost $31.00 on volume of 18,196 contracts. Total open interest declined by a massive 1,300 contracts, which relative to volume is approximately 185% above average meaning that liquidation was extremely heavy as cocoa prices moved to their lowest level Since July 17 (3054). As this report is being compiled on September 9, December cocoa has made another new low for the move at 3030, but has rebounded smartly to close at 3079. The close on September 9 is the first positive close since September 2 . We want to see more of a rally before considering bearish positions. Until then stand aside.

Coffee:

December coffee lost 3.60 cents on volume of 20,244 contracts. Total open interest increased by 661 contracts, which relative to volume is approximately 30% above average meaning that new short sellers were entering the market and driving prices to a new low for the move (1.9240).The coffee market continues to display weakness and the open interest action is bearish as well. Additionally, the 50 day moving average of 185.51, is below the 150 day moving average of 187.02, which is another sign of price weakness. As this report is being compiled on September 9, December coffee has closed at 1.9260, which is the lowest close since August 25 (1.8765). Ultimately, we think coffee prices will head higher, but as we have said before, there is a deflationary trend in almost all commodities due in great part to the very strong dollar. December coffee remains on a short and intermediate term buy signal. Stand aside for now.