Soybeans:
November soybeans lost 20.75 cents on volume of 170,376 contracts. Volume declined by approximately 43,000 contracts from September 4 when soybeans gained 11.75 and open interest declined by 2,195 contracts, which in relation to volume is approximately 40% above average. It is positive to see a significant decline in volume when soybeans fell by over 20 cents. We have been cautioning speculators about the potential for a setback during this week due to the unfavorable conditions existing in the market. Please see the September 2 Weekend Wrap for details on the reasoning behind our views on soybeans. It is important to remember, corn rallied after the August crop report, made a new high for the move, but then fell off a cliff and has been recently trading in the high seven dollar area. It is conceivable that even if the report is bullish, soybeans may rally, but the rally may disappoint. As this report is written on September 6, precious metals, the petroleum complex and the stock market are all trading higher, but this is not moving soybeans higher.
Soybean meal:
October soybean meal lost $8.70 on volume of 64,528 contracts. Volume shrank by approximately 25,000 contracts from September 4 when soybean meal declined $2.30 and open interest declined by 5,083 contracts. On September 5, open interest declined by 4,139 contracts, which in relation to volume is more than 100% above average. For the past three days, open interest in soybean meal has declined by a total of 11,865 contracts. During this time, soybean meal prices have declined by $13.20. This is a fairly heavy decline of open interest considering the relatively small price decline. However, the long to short ratio is at extreme levels, and closing out positions is not unexpected considering the nervousness of an adverse announcement out of Europe. We remained friendly to soybean meal, however at this juncture no new positions should be entered.
Corn:
December corn lost 14.25 cents on volume of 186,005 contracts. Volume shrank approximately 27,000 contracts from September 4 when corn gained 5.25 and open interest increased by 4,405 contracts. On September 5, open interest declined by 7,773 contracts, which in relation to volume is approximately 30% above average. With harvest beginning, expect pressure on corn prices, and although the USDA report to be released on September 12 may be bullish, the chances are the results are already baked into the price. While we are friendly to corn longer term, we don’t see any reason to be long at current levels. As this report is being compiled on September 6 corn is trading 8.00 cents higher.
Wheat:
December wheat lost 21.00 cents on light volume of 67,061 contracts. Volume increased by approximately 2,500 contracts from September 4 when wheat declined 0.75 cents and open interest increased by 3,789 contracts. On September 5, open interest declined by 3,063 contracts, which in relation to volume is approximately 60% above average. As this report is being compiled on September 5, December wheat is trading 21.00 cents higher, which is far exceeding the advance in corn. As we have indicated before, we are friendly to wheat, but feel it is premature to enter long positions at this juncture.
Crude oil:
October crude oil gained 6.00 cents on volume of 494,973 contracts. Open interest increased by 3,578 contracts. From August 15 through September 5, open interest has increased by a total of 65,493 contracts. During this time, crude oil prices have increased by a mere 74.00 cents. The point is that healthy increases of open interest is not pushing crude oil prices much beyond where they were on August 15. As this report is being compiled on September 6, crude oil is trading 13 cents higher after making a high for the day of $97.71. Stand aside.
Heating oil:
October heating oil lost 2.92 cents on volume of 122,568 contracts. Open interest increased by 4,848 contracts, which in relation to volume is approximately 25% above average. This is the second day in a row when heating oil has declined and open interest has increased. Stand aside.
Gasoline:
October gasoline lost .0024 cents on very low volume of 102,490 contracts. Volume declined by approximately 20,000 contracts from September 4 when gasoline declined by 2.00 cents and open interest increased by 1,737 contracts. On September 5, open interest declined by 1,204 contracts, which in relation to volume is 50% below average. Stand aside.
Copper:
December copper gained 4.20 cents on healthy volume of 69,195 contracts. Volume was the highest since August 29 when copper traded 77,054 contracts and the price declined by 2.00 cents while open interest declined 1,418 contracts. On September 5, open interest increased by a healthy 4,111 contracts, which in relation to volume is approximately 100% above average. September 5 was the first day when copper made a good-sized advance on increased volume accompanied by a heavy increase in open interest. As indicated in yesterday’s report, our view of copper has shifted to the long side due to the shrinking supply of copper inventory stored in the warehouses of the Shanghai Metals Exchange the Commodity Exchange of New York and the London Metal Exchange. The market is somewhat overbought relative to its 50 day moving average of $3.43, and will have to decisively break above the 200 day moving average of $3.58.
Gold:
December gold lost $2.00 on light volume of 113,942 contracts. Volume was the lightest since August 30 when 102,696 contracts were traded and gold declined by $5.90 while open interest increased by 1,748 contracts. On September 5, open interest declined by 394 contracts. The market remains overbought and as this report is being written on September 6, gold is trading $11.40 higher. No new positions should be entered at these levels. Wait for a correction.
Silver:
December silver lost 8.2 cents on very light volume of 34,709 contracts. Volume was the lightest since August 17 when 28,918 contracts were traded and silver declined by 21.00 cents while open interest declined 1,072 contracts. Part of the decline of volume can be explained by the very narrow range of 31.3 cents versus the 21 day average true range of 70.1. The market remains massively overbought, and new positions should not be entered until there is a healthy setback.
Euro:
The September Euro gained 27 points on fairly heavy volume of 308,230 contracts. Volume was the highest since August 31 when 316,164 contracts were traded and open interest increased by 2,214 contracts. On September 5, open interest increased by 4,907 contracts, which in relation to volume is approximately 60% less than average. For the past three trading days, open interest has increased by 7,682 contracts while the Euro advanced by more than 1.00 cent. We have been cautioning readers that the market had made a temporary low and was headed higher. As this report is being compiled on September 6, the Euro is trading 41 points higher and has made a new high for the move at 1.2654. Do not short the Euro.
10 Year Treasury Notes:
The December 10 year treasury note lost 1.5 points on relatively light volume of 906,868 contracts. Open interest declined by 15,377 contracts, which in relation to volume is approximately 25% less than average. During the past two days, open interest has declined by 73,294 contracts, which basically erases the open interest increases for more than three previous trading days. As this report is being compiled on September 6, the December treasury note is trading 20 points lower. We have been cautioning readers they should not enter into new long positions despite notes generating a short and intermediate term buy signal on September 4.
S&P 500 E mini:
The September S&P 500 E mini lost 2.50 points on light volume of 1,439,389 contracts. Volume was the lowest since August 30 when 1,230,463 contracts were traded and the S&P lost 10.25 points and open interest increased by 9,238 contracts. On September 5, open interest declined by 10,509 contracts, which in relation to volume is 60% less than average. As this report is being compiled on September 6, the E mini is trading 26.50 points higher and has made a new high for the move at 1430.75. We continue to suggest that long put protection be in place.
