The Shanghai Composite Index closed at 2004.17 down 1.24% and the lowest close since January 2009.

Soybeans: On September 21, November soybeans generated a short-term sell signal.

November soybeans gained 1.50 cents on extremely low volume of 151,303 contracts. Open interest declined by a minuscule 401 contracts. For the past four days, volume has declined each successive day as the market traded lower. As we have said before, the essential problem with soybeans is that the number of managed money speculators still remains at elevated levels, despite the move sharply lower. As this report is being compiled on September 26, November soybeans are trading 43.50 cents lower after having made a new low for the move at $15.65. On September 21, November soybeans generated a short-term sell signal, and it was surprising that the market was not able to mount even a small rally after the sell signal was generated. Additionally, the market was not able to rally above the high of $16.26 made on Monday. It is difficult to assess where this move ends, but once the liquidation is over, soybeans are going to be a terrific buy. Stand aside.

Soybean meal: On September 21, December soybean meal generated a short-term sell signal.

October soybean meal gained $3.60 on very light volume of 55,928 contracts. Volume was somewhat less than the volume recorded on September 19, when 55,987 contracts were traded and soybean meal advanced $8.30, while open interest declined by 2,064 contracts. On September 25, open interest declined by 2,286 contracts, which in relation to volume is 65% above average. From September 17 through September 25, open interest has declined by 21,627 contracts while soybean meal has declined by $38.30. During the same time frame, soybean open interest has declined by 10,793 contracts while soybean prices have declined by $1.27 1/2. In other words, open interest in soybean meal has declined at twice the rate of soybeans in the five day period, even though soybeans trade 250-300% more volume than soybean meal. Additionally, the long to short ratio based upon the recent COT report shows the soybean ratio stands at 23.20:1 while soybean meal is 9.14:1. Managed money is more than twice as committed to the long side of soybeans than they are to soybean meal. This is positive for soybean meal. As this report is being compiled on September 26, December soybean meal is down $13.90 after making a new low for the move at $473.20. Stand aside for now.

Corn:

December corn lost 1.00 cents on extremely light volume of 130,422 contracts. Volume declined by approximately 42,000 contracts from September 24, when corn lost 0.75 cents and open interest declined by 3,078 contracts. On September 25, open interest gained 556 contracts, which in relation to volume is 70% below average. As this report is being compiled, corn is trading 18.50 cents lower and has made a new low for the move at $7.221/2. Corn  is likely to find support at the 150 day moving average of $6.88, and the 200 day moving average of $6.72 on the continuation chart. Stand aside.

Wheat:

December wheat closed 5.50 cents lower on very light volume of 56,721 contracts. Open interest declined by 1,014 contracts, which in relation to volume is approximately 30% below average. As this report is being compiled on September 26, wheat is trading 15.50 cents lower. Stand aside. 

Crude oil:

November crude oil lost 56.00 cents on volume of 436,492 contracts. Volume increased by approximately 73,000 contracts from September 24, when crude oil lost 64.00 cents and open interest declined by 2,510 contracts. On September 25, open interest declined by 6,420 contracts, which in relation to volume is 40% less than average. During the past seven days, open interest has declined by 85,299 contracts while oil has declined by $7.64. We have been cautioning readers against long positions, and as this report is being compiled on September 26, November crude oil is trading $1.93 lower and has made a new low for the move at $88.95.  On the plus side, there has not been an open interest increase during the decline. As indicated in previous reports, the Shanghai Composite Index is trading in a new low territory, and this does not bode well for crude oil consumption. Stand aside.

Heating oil:

November heating oil gained 1.08 cents on fairly heavy volume of 167,959 contracts. Volume increased by approximately 31,000 contracts from September 24 when heating oil declined by 2.16 cents and open interest increased by 1,778 contracts. On September 25, open interest increased by 946 contracts, which is minuscule compared to volume. As we indicated in yesterday’s report, the open interest and price action leaves a lot to be desired and speculators should stand aside.

Gasoline:

November gasoline gained 3.47 cents on fairly heavy volume of 164,877 contracts. Volume increased approximately 25,000 contracts from September 24 when gasoline lost 2.92 and open interest declined by 5,165 contracts. On September 25, open interest declined by 4,550 contracts, which in relation to volume is average. The decline of open interest on the advance is attributable to the likelihood of profit taking. Gasoline is trading in a more positive fashion than heating oil and with the exception of the negative price/open interest action on September 25, it is the strongest member of the petroleum complex. However, due to the weakening price of crude oil, speculators should continue to stand aside.

Copper:

December copper gained 2.70 cents on volume of 49,466 contracts. Open interest increased by 1,489 contracts, which in relation to volume is average. Although price and open interest action is congruent, which is positive, the continued weakness of the Shanghai Composite Index is troubling and this suggests that long positions be avoided. As this report is being compiled on September 26, December copper is trading 4.65 cents lower.

Gold:

December gold gained $1.80 on volume of 183,431 contracts. Open interest declined by 1,228 contracts, which in relation to volume is approximately 60% less than average. As we indicated in yesterday’s report, the shorts have been in control during the last five days, and the market appears to be in a corrective phase, which is very healthy for gold due to its severe overbought condition. As this report is being compiled on September 26, December gold is trading down $11.30 after having made a new low for the move at $1738.30. We expect more downside action, and therefore speculators should target the area of $1720 as a possible entry point for long positions.

Silver:

December silver lost 3.6 cents on volume of 52,826 contracts. Open interest increased by 3,207 contracts, which in relation to volume is approximately 60% above average. Although the market is holding up well. The build in open interest is troubling because it shows that shorts remain in control. Stand aside.

Euro:

The December euro lost 9 points on volume of 256,855 contracts. Open interest increased by 1,014 contracts, which is significantly less than average. The market is having a well-deserved pullback and should find support at the 200 day moving average of 1.2835. The market remains overbought relative to its 50 day moving average of 1.2532, but we think the euro is headed higher.

S&P 500 E mini:

The S&P 500 E mini lost 14.25 points on volume of 1,814,800 contracts. Open interest increased by 21,233 contracts, which in relation to volume is 60% below average. The market is going through a pullback after making a high of 1468 on September 14. We fully expect a retest of the high, but question the ability of the e-mini to move significantly higher from there. The market is in the process of discounting an Obama victory in November. The US faces some potentially disastrous fiscal problems between now and the election and it is difficult to determine when this fully engulfs the market. As indicated in prior reports, long put protection should be in place.