Soybeans:

September soybeans lost 6 cents while the November contract lost 11 cents on total volume of 162,974 contracts. Open interest increased by 8,449 contracts, which relative to volume is approximately 100% above average. The September contract accounted for loss of 1,053 of open interest. As this report is being compiled on September 3, September beans are trading 12.25 cents higher while the November contract is trading +27.50. The September contract has made another new high for the move at $14.67 3/4 while the November contract is 1  cent shy of the high of 14.09 1/2 made on August 27. Although we expect beans to continue higher, this is a weather dominated market, which means that volatile trading is the order of the day. Soybeans remain on a short and intermediate term buy signal.

Soybean meal:

September soybean meal advanced 80 cents while the October contract lost $5.50 on total volume of 64,176 contracts. Total open interest declined by 3,427 contracts, which relative to volume is approximately 110% above average. The September contract accounted for loss of 2,519 of open interest. Note that total open interest declined in soybean meal, but increased in soybeans. As this report is being compiled on September 3, September soybean meal has made a new high for the move at $493.50, which takes out the previous high of 473.30 made on August 29. The October contract also has made another new high at $448.40, which took out the high of 440.16 made on August 29. Soybean meal remains on a short and intermediate term buy signal.

 Soybean oil:

December soybean oil advanced 9 points on volume of 75,756 contracts. Total open interest declined by 2,370 contracts, which relative to volume is approximately 20% above average. The September contract accounted for loss of 2,108 of open interest. As this report is being compiled on September 3, December soybean oil is trading unchanged on the day. On August 27, December soybean oil generated a short-term buy signal, but remains on an intermediate term sell signal.

Corn:

December corn gained 0.50 cents on volume of 164,720 contracts. Total open interest declined by 2,608 contracts, which relative to volume is approximately 35% less than average. The September contract accounted for loss of 10,836 of open interest. In the evening session on September 2, corn rocketed higher at the opening and made a high of $4.93 3/4, which took out the high of 4.92 made on August 28. As this report is being compiled on September 3, corn is trading 9.25 lower and remains on a short and intermediate term sell signal.

Wheat:

December Chicago wheat lost 0.25 cents while the December Kansas City wheat contract gained 0.25. Total volume for the Chicago contract was 48,858 contracts and total open interest declined by 1,605 contracts, which relative to volume is approximately 20% above average. The September contract accounted for loss of 1,876 of open interest. As this report is being compiled on September 3, December Chicago wheat is trading 7.25 lower while the KC December contract is trading -4.75 cents. Both remain on a short and intermediate term sell signal. For more information on Kansas City wheat, please see the September 2 Weekend Wrap.

Cotton:

December cotton advanced 25 points on volume of 21,508 contracts. Massive liquidation continued with total open interest declining by 2,446 contracts, which relative to volume is approximately 240% above average. Since topping out on August 19, open interest has collapsed, and as this report is being compiled on September 3, December cotton is trading 65 points lower.

From the September 2 Weekend Wrap:

“Remarkably, the net long position of managed money is higher than it was 2 weeks ago when cotton was trading at higher prices.  For example, the trading range of cotton during the COT report which covered the period from August 7 through August 13 was 85.69-92.54 and December cotton closed at 91.72 on August 13. The net long position of manage money during this time was 6.07:1. In short, cotton is trading considerably below the range of 2 weeks ago , yet the net long position of managed money is nearly 10% above it. This tells us more liquidation is ahead.”

Live cattle:

October live cattle lost 17 points on volume of 45,363 contracts. Total open interest declined by a massive 3,138 contracts, which relative to volume is approximately 180% above average, meaning that liquidation was extremely heavy on a minor decline and a narrow range day. The market looks tired, and we expect the gap will be filled between the high of August 7 and the low of August 8. Additionally, the large number managed money longs should add selling pressure as prices move sideways to lower. Cattle remains on a short and intermediate term buy signal, but we advise clients to stand aside.

Crude oil:

October crude oil lost $1.15 on volume of 503,594 contracts. Total open interest declined by 10,830 contracts, which relative to volume is approximately 15% below average. The October contract lost 12,656 of open interest. As this report is being compiled on September 3, October crude is trading 73 cents higher.

From the September 2 Weekend Wrap:

” As crude oil has moved higher during the past couple of weeks, the net long position of managed money has been declining. During the latest COT reporting, October WTI advanced $3.82, yet the net long position of managed money increased fractionally. Additionally, open interest increased only 19,917 contracts over these 5 sessions, which is minuscule and dramatically below average. In short, there appears to be little interest in the long side of WTI. Perhaps, the most revealing trading day occurred on August 28 when WTI made a new high $112.24, closed $1.09 higher while open interest declined 560 contracts. We are bearish crude oil, however, it remains on a short and intermediate term buy signal.”

Natural gas:

October natural gas lost 3.7 cents on volume of 204,367 contracts. Total open interest increased 693 contracts, which relative to volume is minuscule and dramatically below average. The October contract lost 694 of open interest. As this report is being compiled on September 3, October natural gas is trading 8.9 cents higher. On August 29, October natural gas generated a short-term buy signal, but remains on an intermediate term sell signal.

From the August 29 report:

“The market should find support at $3.510, which was the low on August 29 and at 3.44. Natural gas should find resistance at the 200 day moving average of $3.68 and the 150 day moving average of $3.74. We advise clients to take advantage of any setback to initiate bullish positions. For futures traders, sell stops should be slightly below the August 29 low. We think options are great way to play the natural gas market, and at this juncture they are cheap.”

Gold:

December gold lost $16.80 on volume of 141,788 contracts. Total open interest declined by 2,245 contracts, which relative to volume is approximately 35% less than average. During the past 3 trading sessions beginning on August 28, gold has declined each day and open interest has declined as well. This is positive open interest action relative to the price decline. As we have said in previous reports, it does not appear that market observers believe in the gold rally. While we agree that gold has much backing and filling to do, but we think a new bull market has begun. On August 9, December gold generated a short-term buy signal and this was confirmed by the generation of an intermediate term buy signal on August 26. As this report is being compiled on September 3, December gold is trading $14.50 higher.

Silver:

December silver lost 62.7 cents on volume of 47,043 contracts. Total open interest declined by 2,800 contracts, which relative to volume is approximately 140% above average, meaning that liquidation was substantial on a large price decline. This is positive. As this report is being compiled on September 3, December silver is trading 93.2 cents higher, but is still below the high of $25.16 made on August 28. Like gold, silver has much backing and filling to do before it can move to new highs.

Euro:

The September euro lost 35 points on volume of 181,365 contracts. Total open interest declined by 7,220 contracts, which relative to volume is approximately 55% above average, meaning that liquidation was fairly heavy. As this report is being compiled on September 3, the September euro is trading 39 points lower and has made a new low for the move at 1.3138.

From the August 20 report:

“In our view, the massive spike of open interest as the market was breaking out to new highs tells us that the Johnny-come-lately crowd decided to throw in the towel and get long. Often, big spikes in volume and/or open interest can signal the end, or temporary end of a move. We suggest that clients take profits or partial profits on long positions. The euro is overbought and a further correction is a reasonable expectation, especially since managed money holds the largest net long position in a couple of months. Additionally, we suspect that the COT report, which will be released this Friday, and was tabulated yesterday will show a further increase in the net long position of managed money. This makes the euro vulnerable to sharp setbacks.”

From the September 2 Weekend Wrap:

“With managed money holding the largest net long position in the euro in quite some time , it is vulnerable to further downside action. The euro is on the cusp of generating a short-term sell signal, and with managed money holding a hefty net long position, selling will accelerate as the euro breaks major support. On August 30, the September euro made a new low for the move at 1.3173, which is its lowest price since June 25 when the euro made a low of 1.3168. We think the path of least resistance is down.”

S&P 500 E mini:

The S&P 500 E mini lost 5.50 points on fairly heavy volume of 1,952,170 contracts. Total open interest declined by 21,489 contracts, which relative to volume is approximately 50% below average. So far, the decline in the indices has been orderly, which has given comfort to the bulls. We think there is much worse to come, and those who are heavily long will soon be rushing for the exit when they finally realize the market likely topped out in early August. Long put protection should be initiated on any rally.