Soybeans:

November soybeans gained 3 cents on volume of 144,170 contracts. Total open interest declined by 3,098 contracts, which relative to volume is approximately 20% less than average. As this report is being compiled on September 30 after the release of the grain stocks report, November soybeans are trading 28.50 cents lower and have made a new low for the move at $12.84. We have been cautioning clients to avoid the long side of soybeans because we felt a short-term sell signal was imminent. We will provide a rundown on the grain stocks numbers in tomorrow’s report. It is a certainty that soybeans will generate a short-term sell signal on September 30.

From the September 26 report:

“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 gained $3.40 on heavier than normal volume of 85,521 contracts. Total open interest declined by 2,872 contracts, which relative to volume is approximately 35% above average, meaning that liquidation was fairly heavy on the advance. As this report is being compiled on September 30, after the release of the grain stocks report, December soybean meal is trading $12.40 lower and has made a new low for the move at $404.00. Like soybeans, we have been cautioning clients to avoid the long side of soybean meal. Soybean meal will not generate a short-term sell signal on September 30.

Corn:

December corn lost 2.75 cents on volume of 138,433 contracts. Total open interest increased by 1,094 contracts, which relative to volume is approximately 65% less than average. As this report is being compiled on September 30 after the release of the grain stocks report, December corn is trading 7.25 cents lower and has made a new low for the move at $4.46 1/2. Corn remains on a short and intermediate term sell signal.

Wheat: On September 27, December Kansas City wheat generated an intermediate term buy signal, which confirmed the short-term buy signal generated on September 25. Chicago wheat remains on a short-term buy signal,  but has not yet generated an intermediate term buy signal.

December Chicago wheat advanced 4.75 cents and Kansas City wheat gained 4.50. Total volume in Chicago wheat was 83,753 contracts, and open interest increased by 1,406 contracts, which relative to volume is approximately 30% less than average. Total volume for Kansas City wheat was 25,895 contracts and open interest increased by 967 contracts, which relative to volume is approximately 40% above average. Note the difference between the open interest increase as a percentage of volume in Chicago versus Kansas City wheat. The action in KC wheat was very positive and Chicago wheat was considerably less so. As this report is being compiled on September 30 after the release of the grain stocks report, Chicago wheat is trading 3.25 cents lower while the December KC contract is trading 3.50 cents higher. Undoubtedly, the poor performance of corn is dragging down Chicago wheat prices. Both Chicago and KC markets are overdue for a correction, and this may be the day when it occurs. Chicago wheat made a new high for the move on September 30 of $6.94 3/4 while the KC contract made a new high of $7.46 1/2.

Cotton: On September 30, December cotton generated a short and intermediate term buy signal.

December cotton advanced 1.16 cents on volume of 24,346 contracts. Volume was the highest since August 22 when 27,211 contracts were traded. Total open interest increased by a massive 8,282 contracts, which relative to volume is approximately 960% above average, meaning that new longs were entering the market at extraordinarily high levels and driving prices higher. As this report is being compiled on September 30, December cotton is trading 52 points higher and has made a new high for the move at 87.50. On September 26, we recommended that the short out of the money cotton call be liquidated.

Live cattle:

December cattle gained 50 points on volume of 44,097 contracts. Total open interest increased by 64 contracts and the October contract lost 2,037 of open interest. On September 27, December cattle made a new closing high of 1.32075 and made a new high for the move at 1.32250. As this report is being compiled on September 30, the market has pulled back a bit, but we expect more of a correction before new long positions can be initiated. Based upon the nearly unchanged number of total open interest, it appears that new buyers went on strike on the 27th and refused to initiate new positions at the upper end of the trading range. This confirms the likelihood of a correction.

Crude oil:

November crude oil lost 16 cents on light volume of 466,571 contracts. Total open interest declined by 10,127 contracts, which relative to volume is approximately 15% below average. As this report is being compiled on September 30, November crude is trading $1.08 lower and has made a new low for the move at $101.05. On September 23, November crude oil generated a short-term sell signal, however, it will not generate an intermediate term sell signal on September 30. We have been warning clients about the vulnerability of crude oil and stated that further upside is limited. As testament to the weakness of crude, ever since the short-term sell signal was generated on September 23, the market has been unable to stage a decent size rally that would allow for the initiation of short futures positions. As an alternative, we have suggested writing out of the money calls with strike prices based upon your risk tolerance.

Natural gas:

November natural gas advanced 2.2 cents on very light volume of 182,687 contracts. Total open interest increased by 3,101 contracts, which relative to volume is approximately 30% below average. The October contract lost 376 of open interest. On September 25, November natural gas generated a short-term sell signal, and had already been on an intermediate term sell signal. Ever since the generation of the signal, natural gas has been trading in a very bearish fashion, and has not had a decent size rally that would allow for the initiation of short futures positions.

Euro:

The December euro gained 31 points on volume of 150,157 contracts. Total open interest increased by 4,327 contracts, which relative to volume is approximately average. The euro remains on a short and intermediate term buy signal.

Australian dollar:

The December Australian dollar lost 38 points on volume of 56,878 contracts. Total open interest declined by 458 contracts, which relative to volume is approximately 55% below 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 6.00 points on volume of 1,434,829 contracts. Total open interest declined by 4,106 contracts, which is minuscule and dramatically below average. As this report is being compiled on September 30, the December E mini is trading 6.75 points lower and has made a new low for the move at 1666.75. We continue to advocate long put protection, especially for those clients who hold long equity positions.