Soybeans:

November soybeans lost 14.50 cents on volume of 176,261 contracts. Total open interest increased by 2,308 contracts, which relative to volume is approximately 45% less than average. The September contract, which is about to expire lost 31 of open interest. As this report is being compiled on September 16, November soybeans are trading 34.25 lower and January beans -32.50. The November-January spread appears to be moving into contango after having inverted on August 26. Interestingly, November soybeans have been trading in a sideways pattern ever since August 26 and with the change in the spread, we consider this to be a signal of potential further weakness. Soybeans remain on a short and intermediate term buy signal.

Soybean meal:

December soybean meal lost $4.40 on volume of 65,680 contracts. Total open interest declined 292 contracts, which relative to volume is approximately 80% less than average. The September contract lost 55 of open interest. As this report is being compiled on September 16, October soybean meal is trading $14.10 lower while the December contract is -$14.90. Soybean meal remains on a short and intermediate term buy signal.

Corn:

December corn lost 7.25 cents on volume of 137,851 contracts. Total open interest increased by 7,252 contracts, which relative to volume is approximately 100% above average meaning that new shorts were heavily entering the market and driving prices lower. The September contract lost 744 of open interest. Note that the soybean contract traded nearly 40,000 contracts more than corn, which is highly unusual. The tepid volume on the decline may signal a temporary bottom. Corn remains on a short and intermediate term sell signal.

Wheat:

December Chicago wheat lost 11.50 cents while the KC contract lost 9.75. Volume traded in Chicago wheat was 69,098 contracts and total open interest in this contract declined by 2,034 contracts, which relative to volume is approximately 20% above average meaning that higher than normal liquidation was the dominant action on the price decline. We remain friendly to wheat, and Kansas City wheat in particular. However, both Chicago and KC wheat are on short and intermediate term sell signals. We await a buy signal before recommending long positions.

Cotton:

December cotton lost 29 points on very light volume of 9,962 contracts. Volume was the lightest since July 22 when 8,738 contracts were traded. On September 13, total open interest increased by 1,323 contracts, which relative to volume is approximately 320% above average, meaning that shorts were heavily initiating new long positions, but could only drive prices moderately lower. As this report is being compiled on September 16, December cotton is trading 23 points lower and has made a low of 83.70. Continue to hold short futures positions with stops above the August 26 high of 85.54.

Live cattle:

October live cattle advanced 42.5 points on volume of 50,881 contracts. Total open interest increased by 1,788 contracts, which relative to volume is approximately 40% above average. Cattle remains on a short-term sell signal, but an intermediate term buy signal. The market would have to break significantly below the September low of 1.2480 before an intermediate term sell signal would be generated. If the market can hold at the current level, it would be very positive. Stand aside.

WTI Crude oil:

October crude oil lost 39 cents on light volume of 461,632 contracts. Total open interest increased by 2,060 contracts, which relative to volume is approximately 80% less than average. The October contract accounted for loss of 21,808 of open interest. All things being equal, the market has been acting very firm and has refused to break lower despite many opportunities to do so. WTI has been trading solidly above its 20 day moving average ($107.55) since August 27. Another positive for crude is the fact that managed money is holding its lowest net long position in over several weeks and we have written extensively about this for a couple of weeks in our Weekend Wrap. We are not crazy about the fundamentals, but it appears that the economies of Europe may be picking up and that China is recovering. Also, the Baltic Dry Index, which is a measurement of freight rates has been climbing and is now at January 2012 levels.Crude remains on a short and intermediate term buy signal.

Natural gas:

October natural gas advanced 3.9 cents on volume of 245,720 contracts. Open interest increased for the 2nd day in a row by 8,226 contracts, which relative to volume is approximately 30% above average meaning that new longs were entering the market and pushing prices moderately higher. As this report is being compiled on September 16, October natural gas is trading 4.7 cents higher and has made a new high for the move at $3.749. During the evening session of September 12, we recommended to clients of OIA Direct to initiate new long positions. Natural gas remains on a short-term buy signal, but an intermediate term sell signal.

Gold:

December gold lost $22.00 on volume of 180,093 contracts. Total open interest declined by 1,051 contracts, which relative to volume is approximately 65% less than average. Gold remains on a short and intermediate term sell signal.

Silver:

December silver lost 42.9 cents on volume of 52,390 contracts. Total open interest increased by 294 contracts, which relative to volume is approximately 45% less than average. Silver remains on a short-term sell signal, but an intermediate term buy signal.

Euro:

The December euro advanced 2 points on volume of 240,766 contracts. Total open interest declined by 3,496 contracts, which relative to volume is approximately 40% less than average. As this report is being compiled on September 16, the December euro is trading 32 points higher and has made a new high for the move at 1.3391. The euro remains on a short and intermediate term buy signal.

Australian dollar:

The Australian dollar lost 16 points on volume of 92,463 contracts. Total open interest increased by 2,110 contracts, which relative to volume is approximately 10% below average. As this report is being compiled on September 16, the December Australian dollar is trading 73 points higher and has made a high for the day of 93.31, which is 22 points shy of the high of 93.53 made on September 12. On September 5, the Australian dollar generated a short-term buy signal, and as of September 16 remains on an intermediate term sell signal. Ideally, we want to see more managed money shorts liquidate before recommending bearish positions.

From the September 8 Weekend Wrap:

“The Australian dollar is traditionally the favorite of managed money, and we expect the market to continue its rally up to the 93.30 area, where we think it will run into trouble. During its journey higher, it will be important to see managed money shorts get blown out before it is wise to initiate bearish positions.”

Japanese yen:

 We noticed there has been a significant amount of bullish activity in the Japanese yen beginning on September 11 and continuing through September 13. For example, on September 11, the yen gained 41 points on heavy volume of 229,696 contracts and open interest increased by 11,331 contracts, which relative to volume is approximately 100% above average. On September 12, the yen advanced 51 points on heavy volume of 213,405 contracts and open interest increased by 10,348 contracts, which is approximately 85% above average. On September 13, the yen advanced for the 3rd day in a row and by 17 points on heavy volume of 181,691 contracts while open interest increased by a stratospheric 19,992 contracts, which relative to volume is approximately 240% above average.

As a point of interest, average daily volume year to date is 189,833 contracts and average daily volume during August was 131,159 contracts. In short, the advance during the past 3 days, was accompanied by heavy volume and a massive increase of open interest on each day. We know that managed money is heavily short, and the action during the past 3 days indicates they are holding on to their short positions. On September 4, the yen generated a short and intermediate term sell signal, but we would take the action of the past 3 days as a potential warning sign that the market may be about to turn. We recommend short positions be liquidated and that clients move to the sidelines.

S&P 500 E mini:

The December S&P 500 E mini gained 3.75 points on heavier than normal volume of 1,925,127 contracts. Total open interest increased by 25,592 contracts, which relative to volume is approximately 45% less than average, but it is consistent with the pattern of the past several days when open interest increases on price advances. This is bullish. Shortly after we published our September 15 Weekend Wrap, it was announced that Larry Summers withdrew his name from consideration as chairman of the Federal Reserve. The E mini and the other major indices rocketed higher at the opening of electronic trading during the evening session.  On September 16, with the exception of the NASDAQ 100, the E mini, DJIA, and Russell 2000 have been trading higher all day. The E mini has made a high of 1703.75, which did not take out the high of the September contract of 1705.00 on August 2. If the market is unable to penetrate this high and close above it, there will begin to be talk about a double top. We continue to think the risk is on the downside, and despite the possibility of a move higher, we strongly advise clients to have long put protection, especially for those who hold long equity positions.