November soybeans gained 1.50 cents on volume of 183,509 contracts. Volume decreased by approximately 63,000 contracts from September 12, when soybeans gained 44.25 and open interest increased by 4,804 contracts. On September 13, open interest declined by 505 contracts. Although the export sales numbers were terrific, the market continues to act in a sluggish manner. It looks tired at the upper end of the trading range, and speculators have to be careful about entering new longs because as the harvest progresses there will be a certain amount of hedge pressure, which will act to suppress prices temporarily. Additionally, the volatility in soybean options continue to decline, which in conjunction with the sluggish trading activity, does not bode well for a major move to the upside in the very short-term. The market’s performance was revealing on September 13 because the Federal Reserve announced QE3, which acted to boost prices of precious metals and equities, yet the November contract essentially closed unchanged. Stand aside for now.
October soybean meal lost $1.90 on volume of 63,047 contracts. Volume declined approximately 20,000 contracts from September 12, when soybean meal gained $13.40 and open interest increased by 1,815 contracts. On September 13, open interest declined by 500 contracts. Like soybeans, soybean meal is trading in a sluggish manner and at this juncture, speculators should stand aside to wait for lower prices.
December corn gained 4.50 cents on volume of 152,507 contracts. Volume declined by nearly 200,000 contracts from September 12, when corn lost 8.25 and open interest increased by 14,025 contracts. On September 13, open interest increased by 4,458 contracts, which in relation to volume is average. On September 11, December corn generated a short-term sell signal, but as we said at the time, speculators should not enter new long or short positions. Stand aside.
December wheat gained 12.00 cents on volume of 71,208 contracts. Volume declined approximately 20,000 contracts from September 12, when wheat gained 6.25 and open interest increased by 71 contracts. On September 13, open interest increased by a massive 7,137 contracts, which in relation to volume is approximately 350% above average. In other words, there wasn’t a lot of participation by speculators, but those that participated were willing to make major commitments at higher prices. We have been bullish wheat for quite some time, and are looking for an entry point. We want to see what happens when the soybean complex and corn decline, which will enable us to measure the relative strength of wheat. One reason for our reticence to recommend wheat positions is that the volatility in wheat options continues to decline. At the very least, we want to see volatility stabilize. Stand aside for now, but be prepared to enter bullish positions on a pullback to the $9.00 area. However, keep an eye on the relative strength of wheat compared to corn and the soybean complex. If wheat continues to hold up when the other grains are declining, this will be a signal to implement bullish positions.
October crude oil gained $1.30 on heavy volume of 760,356 contracts. Volume on September 13 surpassed the volume on August 15 of 746,813 contracts when crude oil closed at $94.33, but was exceeded by the volume on June 29 of 787,945 contracts when crude oil closed at $84.96. On September 13, open interest increased by 21,146 contracts, which in relation to volume is average. From August 15 through September 13, open interest has increased by a total of 144,614 contracts, and during this time, crude oil has advanced a total of $3.69. Although the market continues to inch higher, when taking into account the Federal Reserve quantitative easing program, and the increasingly tense situation in some major oil-producing areas of the Middle East, crude is under performing, in our view. As this report is being compiled on September 14, crude oil is trading 42.00 cents higher after having made a high of $100.42. Stand aside.
October heating oil lost .0037 cents on volume of 167,442 contracts. Volume increased approximately 14,000 contracts from September 12 when heating oil gained 2.95 cents and open interest increased by 1,860 contracts. The market made a new high for the move at $3.2480 but settled to close more than 3.00 cents off the highs. Heating oil continues to be massively overbought and as a result, speculators should stand aside until the market has a healthy correction.
October gasoline lost 3.94 cents on extremely heavy volume of 255,490 contracts. Volume was the highest since April 18 when 277,308 contracts were traded and gasoline closed at $3.2027. On September 13, open interest declined by 1,628 contracts, which in relation to volume is approximately 75% less than average. It is somewhat surprising to see the kind of massive volume witnessed on September 13 only to have a minor decline of open interest. The trading range on September 13 was 8.91 cents, which is nearly 50% greater than the 21 day average true range of 6.03 cents. October gasoline made a low of $2.9126, which was the lowest price since August 31 when October gasoline made a low of $2.9055. Conceivably, with the high volume made on September 13, the low of $2.9126 may hold for a while, but we suspect this will be violated in the near term. There is no compelling reason to be long gasoline at current levels, especially since the 50 day moving average is at $2 88 on the gasoline continuation chart and gasoline is trading 10-12 cents above it.
December copper gained 1.75 cents on volume of 53,784 contracts. Volume declined approximately 20,000 contracts from September 12 when copper declined by.0045 and open interest increased by 1,618 contracts. On September 13, open interest increased by 146 contracts. Since making our bullish call on September 4, copper has advanced by 24.10 cents through September 13. As this report is being composed on September 14, copper is trading 11.80 cents higher, and has made a new high for the move at $3.8380. The market is massively overbought, and speculators should not consider entering long positions at current levels.
December gold gained $38.40 on extremely heavy volume of 283,369 contracts. Volume was the highest since July 27 when gold traded 335,338 contracts, and gold closed at $1618.00. On September 13, open interest increased by 5,594 contracts, which in relation to volume is approximately 25% less than average. The market remains overbought, and speculators should not enter new positions at current levels.
December silver gained $1.48.6 on heavy volume of 95,338 contracts. Volume was the highest since August 27 when 99,974 contracts were traded and silver closed at $31.048. On September 13, open interest increased by 3,680 contracts, which in relation to volume is approximately 30% above average. Since the rally in silver began on August 16, silver has never had an open interest increase even close to the 3,680 increase that occurred on September 13. The reason this is important is that the market is massively overbought on a price basis, but the massive increase in volume and open interest on September 13, may signify that johnny-come-lately’s are entering the market. Since the rally began on August 16, open interest has never approached the level it reached on September 13, which may be a sign of a temporary top. This sets the stage for panic selling when the market eventually corrects. Do not enter new long positions at current levels.
Euro: On September 13, the September Euro generated an intermediate term buy signal
The September Euro gained 91 points on extremely heavy volume of 531,258 contracts. Volume on September 13 took out the volume high made on June 13 of 527,443 contracts. On September 13, open interest increased by 16,091 contracts, which in relation to volume is average. During the past nine trading days, open interest has increased by 59,747 contracts, while the Euro has advanced 4.84 cents. It will be interesting to see if speculators have reduced their short positions in the Commitment of Traders Report to be released on Friday afternoon. As we have been saying ever since the Euro generated a short-term buy signal on August 22, do not enter short positions in the Euro.
S&P 500 E mini:
The S&P 500 E mini gained 17.75 points on extremely heavy volume of 3,959,689 contracts. Volume on September 13 was the highest since June 11, when 4,288,775 contracts were traded and the E mini closed at 1307.00. Volume on September 13, is the second highest of the year. On September 13, open interest increased by 137,106 contracts, which in relation to volume is approximately 15% above average. As this report is being compiled on September 14, the September E mini has made a high of 1474.75. What we are likely to see in the weeks ahead are portfolio managers piling in equities in order to avoid the appearance of being left behind. This should power the E mini significantly higher between now and September 30. We have been advising put protection, and maintain this a wise course of action considering the potential downside once everyone hass loaded up with equities.