Soybeans:

November soybeans advanced 4.75 cents on extremely low volume of 109,460 contracts. Total open interest declined by 495 contracts, which relative to volume is approximately 75% below average. Soybeans remain on a short and intermediate term buy signal. We discourage clients from trading soybeans from the long side. We think a short-term sell signal is imminent.

Soybean meal:

December soybean meal advanced $3.10 on volume of 64,638 contracts. Total open interest increased by 3,489 contracts, which relative to volume is approximately 120% above average meaning that longs and shorts were aggressively entering the market and the longs were in control, but were not able to move the market more than moderately higher. Soybean meal remains on a short and intermediate term buy signal, however we discourage clients from trading meal from the long side.

Corn:

December corn lost 4.50 cents on volume of 153,537 contracts. Total open interest increased by 4,662 contracts, which relative to volume is approximately 20% above average. The pattern of open interest increasing as prices decline has become fairly well-established. December corn made a new low for the move at $4.48, which took out the low of 4.48 1/4 made on September 23. We continue to caution clients about maintaining short positions when corn is massively oversold. As this report is being compiled on September 25, December corn is trading 6.00 cents higher, and we suspect the rally is due to the very strong advance in Chicago and Kansas City wheat. We recommend a stand aside posture.

Wheat:

December Chicago wheat advanced 4.75 cents and Kansas City wheat gained 7.25. Volume Chicago wheat totaled 65,816 contracts and total open interest increased by 1,164 contracts, which relative to volume is approximately 25% less than average. Total open interest in Kansas City wheat declined by 58 contracts on volume of 18,576 contracts. As this report is being compiled on September 25, December Chicago wheat is trading 14 cents higher and has made a new high for the move at $6.74 and the December KC contract is trading 15 cents higher and has made a new high for the move at $7.22 1/2. Both December Kansas City and Chicago contracts will generate a short-term buy signal on September 25. We have been warning for quite some time that wheat would generate a short-term buy signal, and that fundamentals for wheat are bullish. To discuss strategies about how to play the wheat market going forward, subscribers of OIA Direct should contact us at 415-440-1551.

From the September 22 Weekend Wrap:

“Clients should keep in mind that the sharply lower dollar is going to make American wheat much more competitive on the world market. This should encourage further US wheat exports, which is already moving at the fastest pace during the past several years for this time of year. The dollar appears to be in a protracted bear market, and the 50 day moving average is about to cross below the 200 day moving average. According to the latest USDA report, 57% of the USDA export projection of 1.1 bb is already on the books. We think the biggest barrier to rising wheat prices has been declining corn prices. We think it is inevitable that wheat will generate a short-term buy signal, and when it does, the speculative short position held in Chicago wheat will add significant fuel for an upside move.”

Cotton:

December cotton advanced 11 points on very light volume of 9,530 contracts. Total open interest increased by 61 contracts, which is minuscule and dramatically below average. We have suggested that clients write out of the money calls in cotton to take advantage of its sideways to lower movement. Keep in mind that the USDA will release its stocks report on Monday, September 30 and therefore caution is in order for any positions held into the report. The lackluster volume and open interest action indicates a lack of interest on the part of market participants, which dovetails with our strategy of writing out of the money calls. Cotton remains on a short and intermediate term sell signal.

Live cattle:

December live cattle advanced 72 1/2 points on volume of 43,519 contracts. Total open interest increased by a massive 3,320 contracts, which relative to volume is approximately 210% above average. The October contract lost 2,567 of open interest, which makes the total open interest increase much more impressive. The performance of open interest relative to the price advance on September 23 and 24 has been nothing short of spectacular. As this report is being compiled on September 25, December cattle is trading 20 points higher and has made a new high for the move at 1.31750.

On September 24, December cattle broke out to new highs last seen in March 2013. Another positive factor for trading on September 23 and 24 was that volume of 41,477 and 43,519 respectively was below the average daily volume for August of 47,699, July 46,400 and the average daily volume year to date of 51,828. The reason why this is important is it shows that the market has not yet attracted large numbers of participants. Those who are participating are making strong commitments, but the move thus far has not garnered attention from a wider audience. This is bullish. In yesterday’s report, we suggested that if clients wanted to initiate long positions, they should be at a minimal size, because we anticipate a pullback, that could last 1-3 days, which is typical after the generation of a short-term buy signal.

Crude oil:

November crude oil lost 46 cents on volume of 552,340 contracts. Total open interest declined by 2,918 contracts, which relative to volume is approximately 75% below average. The October contract lost 1,651 of open interest. On September 23, November crude oil generated a short-term sell signal, and typically after the generation of that signal, the market has a pullback that lasts from 1-3 days. This could take crude up to the $105.00 level. As this report is being compiled on September 25, November crude oil is trading 52 cents lower.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.6 million barrels from the previous week. At 358.3 million barrels, U.S. crude oil inventories are toward the upper range for this time of year. Total motor gasoline inventories increased by 0.2 million barrels last week and are in the upper half of the average range. Distillate fuel inventories decreased by 0.2 million barrels last week and remain near the lower limit of the average range for this time of year. Propane/propylene inventories increased by 1.0 million barrels last week and are in the middle of the average range. Total commercial petroleum inventories increased by 1.5 million barrels last week.

Natural gas:

November natural gas lost 11.8 cents on volume of 315,919 contracts. Total open interest declined by 9,763 contracts, which relative to volume is approximately 20% above average. The October contract lost 9,980 of open interest. Clients should be on the sidelines with the exception of any short calls that may have been written per our recommendation of September 22. Ever since natural gas generated a short-term buy signal on August 29, the market has been acting in a distinctly unimpressive fashion, and at this juncture natural gas remains on a short-term buy signal, but a weak one. Based upon the 50 day moving average being below the 200 day moving average, we conclude that natural gas has much backing and filling to do. The trading activity since the generation of the buy signal represents the backing and filling to which we are referring.

Euro:

The December euro lost 19 points on one very light volume of 138,058 contracts. Total open interest increased by 711 contracts, which relative to volume is approximately 75% less than average. The euro remains on a short and intermediate term buy signal.

Australian dollar:

The December Australian dollar lost 50 points on volume of 66,638 contracts. Total open interest declined by 809 contracts, which relative to volume is approximately 45% less than average. The Australian dollar remains on a short and intermediate term buy signal.

S&P 500 E mini:

The December S&P 500 E mini lost 0.25 points on volume of 1,505,243 contracts. Total open interest increased by 19,761 contracts, which relative to volume is approximately 45% less than average. For the past 4 trading sessions beginning on September 19, the daily highs/lows have been lower, and as this report is being compiled on September 25, this would be the 5th day in a row that his has occurred. On September 25, the E mini has made a new low for the move at 1684.50 and is currently trading 5.25 points lower. We continue to advise long put protection, especially for those who hold long equity positions.