Soybeans:

November soybeans lost 5.00 cents on volume of 117,571 contracts. Total open interest increased by 4,868 contracts, which relative to volume is approximately 55% above average. Yesterday, the USDA reported that 2816.8 thousand tons were sold and sales for the season to date are the best since 2007-2008. The USDA is projecting sales of 1.385 billion bushels, and total sales season to date, which began on September 1 total 944.2 mb. China has been the big buyer of beans. Although the fundamentals for the crop look terrific, clients should not be lulled into a false sense of security on the long side. Although soybeans are on a short and intermediate term buy signal, we think it is unwise to be long at current levels. We are entering the seasonally weak period due to the impending harvest, and though beans will probably move higher later on in the season, we think the upside has been played out for now.

Soybean meal:

December soybean meal lost $2.20 on volume of 74,700 contracts. Total open interest declined by 4,983 contracts, which relative to volume is approximately 160% above average, meaning that liquidation was extremely heavy. The October contract accounted for loss of 5,424 of open interest. The USDA reported on Thursday a 60.41 thousand ton cancellation for the 2012-2013 season. Although we are far more favorably inclined toward soybean meal, we think the entire complex is vulnerable to a further move to the downside. Soybean meal remains on a short and intermediate term buy signal, but we discourage long positions.

 Corn:

December corn advanced 2.00 cents on light volume of 119,401 contracts. Total open interest increased by 3,791 contracts, which relative to volume is approximately 25% above average. The USDA reported that corn sales totaled 640.1 thousand tons. We again caution clients about being short at current levels, despite the fact that corn remains on a short and intermediate term sell signal.

Wheat:

December Chicago wheat advanced 7.75 cents while the December Kansas City contract gained 9.00 cents. Volume in Chicago wheat was 80,304 contracts and open interest declined by 3,542, which relative to volume is approximately 75% above average meaning that liquidation was extremely heavy on a rather modest advance. Volume in Kansas City wheat totaled 19,731 contracts and total open interest declined by 431 contracts, which relative to volume is approximately 15% below average.

The USDA reported that wheat sales totaled 620.2 thousand tons and season to date which began on June 1, shows total sales of 650 mb, or 59% of the total USDA export projection of 1.1 billion bushels. Season to date, US wheat sales are the best since the 2007-2008 season.  Kansas City wheat will generate an intermediate term buy signal on September 27, and Chicago wheat will likely generate an intermediate term buy signal within the next day or two. Both markets are overbought, and we expect that Chicago and Kansas City wheat will correct possibly based upon the USDA report to be released on Monday. We recommended a minimal position when wheat generated the short-term buy signal with the idea that positions can be added, once a correction occurs. Do not chase the market.

The action on September 26 shows that some shorts are getting nervous about the continued upward move in wheat and buyers are taking advantage of higher prices to liquidate positions. On September 25, December Chicago and Kansas City wheat generated short-term buy signals.

Cotton:

December cotton advanced 82 points on volume of 11,687 contracts. Total open interest increased by 1,917 contracts, which relative to volume is approximately 435% above average, meaning that massive numbers of longs were entering the market and driving prices higher. As this report is being compiled on September 27, December cotton is trading 1.41 cents higher and has made a new high for the move at 86.98. Clients should be out the short call position recommended on September 20 and be on the sidelines. It appears that December cotton will generate a short and intermediate term buy signal on September 27.

From the September 25 report:

“With the market closing in approximately 30 minutes, volume is considerably below September 25, despite the larger advance on the 26th. We have advocated writing out of the money calls, but if cotton closes above 85.79, and 86.41, we would close out the short call position.”

Live cattle:

December live cattle gained 30 points on volume of 40,358 contracts. Total open interest declined by 236 contracts, which relative to volume is approximately 70% below average. The October contract lost 1,578 of open interest. As this report is being compiled, December cattle is trading 62 1/2 points higher and has made a new high for the move at 1.32250. On September 23, OIA announced that cattle had generated a short-term buy signal and had been on an intermediate term buy signal. It will be important to see whether managed money has increased their long position when the new COT report is released this afternoon. We will report this in the upcoming September 29 Weekend Wrap. Since generating the short-term buy signal, the market has not had a setback, which makes it difficult to initiate new long positions.

WTI Crude oil:

November crude oil advanced 37 cents on very light volume of 381,036 contracts. Total open interest declined by 3,083 contracts, which relative to volume is approximately 60% below average. As this report is being compiled on September 27, November crude oil is trading 25 cents lower. On September 23, November crude generated a short-term sell signal, but remains on an intermediate term buy signal. Since generating the short-term sell signal, the market has not had much of a countertrend rally, which would allow clients to initiate bearish positions. The market is trading in a very weak fashion, and a break below the $102.00 level could be devastating for the market because there is no support until the mid-90 level. Undoubtedly, the potential talks between the United States and Iran is a bearish influence, however crude oil fundamentals are poor, and in our view, prices are headed lower regardless of the outcome of the talks. Though crude oil is on a short-term sell signal, it remains on an intermediate term buy signal.

Natural gas:

November natural gas advanced 2.1 cents on heavy volume of 421,522 contracts. Total open interest declined by 5,878 contracts, which relative to volume is approximately 40% less than average. The of October contract lost 5,649 of open interest. The market action on September 26 was volatile, with natural gas making a new low for the move the $3.450, then rallying to a high of 3.587 and the closing positively. Despite the impressive price action, the open interest decline is negative. Additionally, since generating a short-term sell signal on September 25, price action on September 26 and 27 confirms the short-term sell signal. Natural gas remains on an intermediate term sell signal as well.

Euro:

The December euro lost 35 points on volume of 140,893 contracts. Total open interest declined by a hefty 7,992 contracts, which relative to volume is approximately 120% above average, meaning that liquidation was extremely heavy. As this report is being compiled on September 27, the euro is trading 33 points higher and has made a daily high of 1.3567, which is shy of 1.3573 made on September 19. The euro remains on a short and intermediate term buy signal.

Australian dollar:

The December Australian dollar lost 3 points on volume of 63,113 contracts. Total open interest declined by 2,767 contracts, which relative to volume is approximately 70% above average. The Australian dollar remains on a short and intermediate term buy signal.

S&P 500 E mini:

The S&P 500 E mini advanced 6.75 points on volume of 1,470,154 contracts. Total open interest increased by 6,234 contracts, which relative to volume is approximately 85% below average. We recommend clients have long put protection, especially for those who hold long equity positions.