Soybeans:

November soybeans lost 8.25 cents on volume of 147,239 contracts. Total open interest increased by 4,601 contracts, which relative to volume is approximately 20% above average. Soybeans made a new low for the move at $13.31 1/2, and as this report is being compiled on September 20, November beans are trading 23.25 cents lower and have made a new low for the move at 13.11 3/4. It is possible that November soybeans will generate a short-term sell signal on September 20.

From the September 17 report:

“On September 17, the November- January spread closed at -0.50 premium to January, which is the first time the spread has closed at this level since August 23. As we stated in the September 15 Weekend Wrap, the change of the structure of the market from one of near term premium to discount is in our view a negative development. Although, soybeans remain on a short and intermediate term buy signal, the market should not be approached from the long side, however, it is premature to contemplate bearish positions because soybeans have not generated a short-term sell signal.”

Soybean meal:

December soybean meal lost $5.40 on volume of 66,436 contracts. Total open interest increased by 1,054 contracts, which relative to volume is approximately 30% less than average. On September 19, December meal made a new low at $419.50, and as this report is being compiled on September 20, December soybean meal is trading $7.60 lower and has made a new low for the move the $410.00. December soybean meal will not generate a short-term sell signal on September 20, and it remains on an intermediate term buy signal.

Corn:

December corn advanced 3.25 cents on volume of 156,751 contracts. Total open interest increased by 2,153 contracts, which relative to volume is approximately 45% less than average. As this report is being compiled on September 20, December corn is trading 8.25 cents lower and has made a new low for the move at $4.51. Corn remains on a short and intermediate term sell signal. Although, it is likely that corn could continue to move lower, we are concerned that new money on the short side has been piling in at the very low-end of the trading range. This makes corn vulnerable to a short covering rally at any time.

Wheat:

December Chicago wheat advanced 10.50 while the December Kansas City contract gained 9.50 cents. Total volume in the Chicago contract was 100,225 contracts and open interest increased by 2,419 contracts, which relative to volume is average. As this report is being compiled on September 20, December Chicago wheat is trading 10.75 cents lower while the KC contract is trading – 8.25 cents. Both Chicago and Kansas City wheat remain on a short and intermediate term sell signal. Stand aside.

Cotton:

December cotton lost 82 points on volume of 12,319 contracts. Total open interest increased by 197 contracts, which relative to volume is approximately 40% less than average.  On September 19, December cotton made a high of 85.78, which is 24 points above the August 26 high of 85.54. Although we will continue to watch cotton before recommending new bearish positions, it is possible the high made on Thursday could be an exit point for new bearish positions. Stand aside. December cotton remains on a short and intermediate term sell signal.

Live cattle:

October live cattle advanced 65 points on volume of 39,112 contracts. Total open interest increased by a massive 3,357 contracts, which relative to volume is approximately 240% above average, meaning that both longs and shorts were aggressively initiating new positions, and the longs were in control. This is the 2nd day in a row that total open interest has increased by over 3000 contracts. What makes this increase even more notable is that on September 19 the October contract lost 2,530 of open interest. On September 18, the October contract lost 2,259 of open interest. As we have said in previous reports, we want to see the long to short ratio in managed money whittled down considerably, which will eliminate potential selling pressure, which will enable demand to take control. October cattle remains on a short-term sell signal, but an intermediate term buy signal.

WTI Crude oil:

November crude oil lost $1.42 on heavy volume of 689,423 contracts. Total open interest declined by 8,785 contracts, which relative to volume is approximately 45% less than average. The October contract accounted for loss of 47,294 of open interest. The minor decline of open interest is consistent with minor increases and decreases of open interest regardless of whether the market is rising or falling. In our view, this indicates uncertainty among participants. We are negative on crude oil, and expect lower prices ahead. November crude oil remains on a short and intermediate term buy signal.

Natural gas:

October natural gas advanced 7 ticks on extremely heavy volume of 486,993 contracts. Volume was the highest since August 13 when 545,069 contracts were traded and October natural gas closed at $3.312. On September 19, total open interest declined by 5,560 contracts, which relative to volume is approximately 50% below average. The October contract accounted for loss of 19,506 of open interest. After the release of the natural gas storage report, at 9:30 am cdt, the October contract made a spike high to $3.820, then proceeded to sell off for the rest of the session and close nearly unchanged. The 15 minute volume after the release of the report totaled 26,546 contracts, and was the highest 15 minute volume of the day. This action had all the earmarks of short covering running up prices. Natural gas remains on a short-term buy signal, but an intermediate term sell signal. If natural gas breaks above $3.820, a new leg higher is in the offing.

Gold:

December gold advanced $61.70 on volume of 188,943 contracts. Total open interest declined by 2,913 contracts, which relative to volume is approximately 40% less than average, but the fact that open interest declined on a massive increase in price is extremely negative. As this report is being compiled on September 20, December gold is trading $35.30 lower. On September 18, December gold generated a short-term buy signal which reversed the short-term sell signal of September 12. It now appears that the short-term buy signal generated on September 18 will be reversed on September 20. Gold remains on an intermediate term sell signal. We have been cautioning clients to avoid the long side of gold because we believe that gold has much work to do before it is a candidate for long positions. One stat that is important to watch is the 50 day moving average crossing above the 150 day moving average. This would be a good indication that gold has found some stability.

Silver:

December silver advanced by $1.728, a massive increase in price on volume of 58,432 contracts. Total open interest declined by 1,392 contracts, which relative to volume is average, but is extremely negative because open interest should have increased by a hefty amount on an advance of this magnitude. Additionally, the volume was lackluster, and compared to September 18, trading was approximately 15,000 contracts fewer on September 19. On September 18, December silver lost 22 cents while open interest increased by 1,816 contracts. December silver remains on a short-term sell signal, but an intermediate term buy signal.

Euro:

The December euro gained 21 points on volume of 225,101 contracts. Total open interest increased by 4,016 contracts, which relative to volume is approximately 20% less than average. The December euro made a new high for the move at 1.3573, and this has not been taken out on September 20. The euro remains on a short and intermediate term buy signal.

Australian dollar:

The December Australian dollar declined 61 points on volume of 99,377 contracts. Total open interest increased by 2,897 contracts, which relative to volume is approximately 20% above average meaning that new shorts were entering the market at numbers that were above average and driving prices lower. Although we think the longer-term prospects for the Australian dollar point lower prices, it is on a short and intermediate term buy signal. Additionally, we want to see managed money reduce their short positions, which will remove potential buying that can power the Australian dollar higher.

S&P 500 E mini:

The December S&P 500 E mini lost 0.25 points on volume of 2,281,127 contracts. Total open interest increased by 18,049 contracts, which relative to volume is approximately 55% below average. As this report is being compiled on September 20, the December E mini is trading 11.25 points lower. We expressed our concern about the disconnect between the stock market and the real economy, and in our view, a readjustment between the two will occur, perhaps in a compressed time frame. Based upon our evaluation of sentiment of the Wall Street press, it appears there is a belief that the continuation of the bond buying program can only result in higher equity prices. Perhaps so, but it is always in the interest of those who hold long equity positions, to have some downside protection.