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The World Agriculture Supply Demand report (WASDE) will be released on September 11 at 11: 00 a.m. central daylight time.

Soybeans:

November soybeans lost 15.75 cents on volume of 179,258 contracts. Volume increased substantially from September 8 when November soybeans lost 13.00 cents on volume of 129,154 contracts and total open interest increased by 1,885. On September 9, total open interest increased by 6,319 contracts, which relative to volume is approximately 40% above average meaning that new short sellers continued to enter the market in fairly substantial numbers and were driving prices to a new contract low (9.92). The September contract lost 76 of open interest, November – 1040, which makes the total open interest increase more impressive (bearish). As this report is being compiled on September 10, November soybeans are trading 4.75 cents higher on the day and has made another new contract low of 9.90.November soybeans remain on a short and intermediate term sell signal. Unless short from higher levels, stand aside.

Corn:

December corn lost 4.00 cents on light volume of 145,284 contracts. Total open interest increased by a substantial 8,113 contracts, which relative to volume is approximately 120% above average meaning that new short sellers were aggressively entering court in heavy numbers and driving prices to a new contract low of 3.43. The September contract accounted for loss of 1,035 of open interest and the December 2014 through December 2015 contracts all gained open interest. As this report is being compiled on September 10, December corn is trading 1.75 cents higher and has not taken out yesterday’s contract low. Unless short from higher levels, stand aside.

Chicago wheat:

December Chicago wheat lost 6.00 cents on light volume of 49,013 contracts.Volume increased somewhat from September 8 when December Chicago wheat lost 1.75 cents on volume of 47,679 contracts, which was the lowest volume day of 2014.On September 9, total open interest increased by 1,237 contracts, which relative to volume is average. The September contract lost 103 of open interest. As this report is being compiled on September 10, December wheat is trading 5.50 cents lower and has made a new contract low of 5.19 1/4. Unless short from higher levels, stand aside.

Live cattle:

December live cattle advanced 1.425 cents on healthy volume of 79,189 contracts. Total open interest increased by 1,175 contracts, which relative to volume is approximately 35% below average. The October contract lost 6,544 of open interest and there were open interest increases in the December 2014 through February 2016 contracts, which makes the total open interest increase more impressive (bullish). As this report is being compiled on September 10, December live cattle is trading 55 points lower, but has made a new contract high at 1.63875, which takes out yesterday’s contract high of 1.62850. Although the October contract sells at a discount to December, the October contract should sell at a premium to December and February if the market is to continue to work its way higher.

Lean hogs:

December lean hogs advanced 2.20 cents on volume of 60,983 contracts. Total open interest increased by 4,066 contracts, which relative to volume is approximately 160% above average meaning that new longs were heavily entering the market and driving prices to a new high for the move (98.850), which is the highest print since 99.500 made on July 25. The October contract lost 4,633 of open interest, which makes the total open interest increase more impressive (bullish).For the past couple of days, we have been discussing the bearish open interest action relative to the price advance, and September 9 is the first indication that market participants are becoming increasingly bullish on hogs. Actually though, this concerns us a bit, and in previous reports we have suggested that bull spreads be used instead of outright long positions. However, the bull spread has not been working very well, and this also suggests that hogs may be in a topping process. In short, if demand is strong, the October contract should outperform the forward months.

WTI crude oil:

October WTI crude oil advanced 9 cents on surprisingly heavy volume of 661,834 contracts. Volume was the strongest since 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 9, total open interest declined only 702 contracts, which is minuscule and dramatically below average. The October contract accounted for loss of 16,984 of open interest. As this report is being compiled on September 10, October WTI is trading $1.12 lower and is made a new low for the move to $91.22, which is the lowest print since February 4, 2014 (90.83). Remarkably, October WTI is declining in the face another decline in inventories in the latest EIA report. With the decline of 1 million barrels in the latest EIA report, WTI inventories have declined by 29.7 million barrels during the past 11 weeks. Despite the massive decline of crude oil inventories, this has not halted the decline in prices. Unless short from higher levels, stand aside.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.0 million barrels from the previous week. At 358.6 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 2.4 million barrels last week, and are in the middle of the average range. Finished gasoline inventories remained unchanged while blending components inventories increased last week. Distillate fuel inventories increased by 4.1 million barrels last week but are below the lower limit of the average range for this time of year. Propane/propylene inventories fell 0.1 million barrels last week but are above the upper limit of the average range. Total commercial petroleum inventories increased by 9.5 million barrels last week.

Natural gas:

October natural gas advanced 10.8 cents on heavy volume of 429,680 contracts. Volume took out the most recent high of 416,413 contracts made on August 13 when October natural gas lost 13.9 cents and total open interest increased by 6,121 contracts. On September 9, total open interest increased by 6,490 contracts, which relative to volume is approximately 40% below average. The October contract accounted for loss of 6,468 of open interest, which makes the total open interest increase more impressive (bullish).As this report is being compiled on September 10, October natural gas is trading 2.9 cents lower and has made a daily low of 3.939, which is below OIA’s key pivot point. In order for October natural gas to generate a short-term buy signal the low of the day must be above 3.955. Until this occurs, stand aside

Gold:

December gold lost $5.80 on volume of 143,575 contracts. Total open interest increased by 1,166 contracts, which relative to volume is approximately 60% below average, however an open interest increase on a price decline is bearish.Yesterday, December gold made a new low for the move at 1248.10, and this has been taken out on September 10 with another new low of 1244.50. Total open interest in gold has increased every day from September 4 through September 9 (+ 15,818 contracts). During this time, December gold lost $21.90. This is bearish. December gold remains on a short and intermediate term sell signal. Stand aside.

Silver:

December silver lost 4.1 cents on volume of 34,827 contracts. Total open interest increased by 684 contracts, which relative to volume is approximately 20% below average. Yesterday, December silver made a new low for the move at 18.890, and this has been taken out on September 10 with another new low of 18.900. December silver remains on a short and intermediate term sell signal. Stand aside.

Copper: December copper will generate an intermediate term sell signal on September 10.

December copper lost 6.65 cents on heavy volume of 82,655 contracts.Volume was the strongest since August 20 when December copper advanced 8.85 cents on volume of 91,356 contracts and total open interest declined by 3,772 contracts. On September 9, total open interest increased by 2,963 contracts, which relative to volume is approximately 45% above average meaning that aggressive new short sellers were heavily entering the market and driving prices to a new low for the move (3.0920), which is the lowest print since June 20 ($3.0670). From the time that copper rallied on August 20, we had been warning clients to stay away from the long side of copper.

From the August 20 report:

“Yesterday , September copper made a high of 3.1785, and this has been taken out slightly by today’s high of 3.1845, which is the highest print since August 12 (3.1890). We consider yesterday’s action to be a rally in a bear market, and sharp rallies are to be expected after a precipitous decline. Copper was massively oversold, and it appears that large numbers of buy stops were triggered, which propelled the market higher. Copper has rallied to its 20 day moving average of 3.1770 and the 50 day moving average of 3.1795, but still remains on a short and intermediate term sell signal. We advise waiting for another day before contemplating bearish positions and we will provide guidance about timing and exit points.Stand aside for now.”

10 year Treasury Notes: On September 9, the December Treasury Note generated a short and intermediate term sell signal.

The December 10 year Treasury Note declined 9.5 points on volume of 1,292,703 contracts. Total open interest increased by a hefty 42,183 contracts, which relative to volume is approximately 30% above average meaning that aggressive new short sellers were entering the treasury note market and driving prices to a new low for the move (124-185), which is the lowest print since August 6 (124-170).The market action yesterday was very bearish, and as this report is being compiled on September 10, the December note has made another new low at 124-120. The treasury note market is well overdue for a rally, and clients should keep in mind the treasury note market can change from a sell signal to a buy signal in short order. For this reason, the note market is not one of our favorite markets to trade.

Euro:

The September euro advanced 11 pips on very heavy volume of 473,784 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 9, total open interest increased by an unbelievable 41,117 contracts, which relative to volume is approximately 250% above average meaning that a battle ensued between longs and shorts, and longs were able to move the market only fractionally higher. Remember this, open interest increases occur when longs and shorts have difference of opinion about the direction of the market. It declines when both longs and shorts are in agreement. The September euro made a new low for the move at 1.2860, not far from its contract low of 1.2833. Conceivably, the massive increase of open interest on September 9 may represent the failure of the short sellers to push the market lower by the close. We continue to advise a stand aside posture due to the real possibility of a massive short covering rally.

British pound:

The September British pound lost 25 pips on very heavy volume of 275,223 contracts.Volume was the strongest since June 12 when 337,633 contracts were traded and the September pound closed at 1.6825. On September 9, total open interest increased by 4577 contracts, which relative to volume is approximately 35% below average. As this report is being compiled on September 10, the September pound has made another new low for the move at 1.6051, which takes out yesterday’s low of 1.6059. The possible secession of Scotland from the United Kingdom continues to weigh on sterling. If Scotland votes to stay with the UK, we expect a very sharp rally. The September pound remains on a short and intermediate term sell signal. Stand aside.

Australian dollar:

The September Australian dollar lost 94 pips on heavy volume of 235,445 contracts.Volume traded on September 9 was the highest of 2014 and took out the previous high of 227,492 contracts traded on March 13. On September 9, total open interest increased by a substantial 10,847 contracts, which relative to volume is approximately 75% above average meaning that large numbers of new short sellers were entering the market and driving prices to a new low for the move (91.84).

As this report is being compiled on September 10, the September Australian dollar is trading lower again, this time by 36 pips and has made another new low for the move at 91.10, which is the lowest print since March 27 (91.11). The Australian dollar remains on a short and intermediate term sell signal. Unfortunately, the market has not had a counter trend rally which would enable clients to initiate bearish positions. As we said yesterday, the main problem with the Australian dollar is that managed money is long by 3.54:1, and this large long position will continue to provide selling pressure as more and more longs are forced to liquidate.

Yen:

The September yen lost 40 pips on heavy volume of 295,397 contracts.Volume was the strongest since March 13, 2014 when 366,715 contracts were traded and the March 2014 yen closed at 9839.On September 9, total open interest increased by a massive 11,453 contracts, which relative to volume is approximately 50% above average meaning that new short sellers were aggressively entering the market and driving prices to a new contract low (.9329). As this report is being compiled on September 10, the September yen is trading 37 pips lower, but has not taken out yesterdays contract low. The September yen remains on a short and intermediate term sell signal. Stand aside.

Cocoa:

December cocoa advanced $8.00 on volume of 28,900 contracts.Volume was the strongest since September 2 when 34,123 contracts were traded and December cocoa lost $64.00. On September 9, total open interest declined by 599 contracts, which relative to volume is approximately 20% below average. The December contract accounted for loss of 2,351 of open interest, which indicates that there were open interest increases in the forward months that offset a good portion of the December open interest decline.As this report is being compiled on September 10, December cocoa has closed at 3063, down 16.00 from yesterdays close. Wait for a rally before initiating bearish positions.

Coffee:

December coffee lost 1.85 cents on volume of 17,924 contracts. Total open interest increased by 267 contracts, which relative to volume is approximately 40% below average. However, the December contract lost 873 of open interest, and there was sufficient open interest increases in the forward months to offset the decline of open interest the December contract. September 9 was the 3rd day in a row that open interest increased as prices declined. From September 5 through September 9, total open interest has increased by 984 contracts while December coffee has declined by 9.85 cents.We have been warning clients about the long side of coffee, and the penetration of the September 4 low of 1.9530 allowed clients to exit with profits.As this report is being compiled on September 10, coffee has collapsed by 11.35 cents to close at 1.8125, and has made a new low for the move at 1.8040, which is the lowest print since July 25 (1.8020).As we have said in previous reports, we think coffee will be a good candidate in the future for long positions, but now is going to a liquidation cycle. Stand aside.

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.”

Cotton:

December cotton advanced 74 points on volume of 17,838 contracts. Total open interest increased by 111 contracts, which relative to volume is approximately 70% below average. The December contract accounted for loss of 321 of open interest, which makes the total open interest increase more impressive (bullish).Yesterday, the December 2014-March 2015 spread widened by 6 points and the December 2014-May 2015 spread widened by 22 points. Today, these spreads have widened again, with the December 2014-March 2015 spread advancing 46 points and the December 2014-May 2015 spread widening by 54 points. The spread action is very bullish for cotton, and we wrote about this in the September 7 Weekend Wrap. At this juncture, for the rally to continue, the daily low must be above OIA’s key pivot point of 65.74. Clients should take a look at bull spreading December 2014-March 2015 or December 2014-May 2015.

From the September 7 Weekend Wrap:

“We want to call your attention to the spread action in the December 2014 and March 2015 contracts. This week, the December contract closed at a 17 point premium to March 2015. This is potentially a bullish development. On August 22, December cotton generated a short-term buy signal and remains on this signal, even though it has declined 1.87 cents from the August 22 close. On August 29, we recommended the liquidation of bullish positions. If December cotton is to generate a short-term sell signal, the high of the day must be below OIA’s key pivot point of 64.40. Stand aside.”