Soybeans:

September soybeans gained 11.50 cents while the November contract advanced 29.25 on total volume of 219,315 contracts. Total open interest increased by 3,152, which relative to volume is approximately 45% less than average. The September contract accounted for loss of 1,997 of open interest. As this report is being compiled on September 4, September beans are trading 40 cents lower while the November contract is -32.50. The reason being given for the lower trading on September 4 is the potential of a wet weather pattern during the next several days. We have advised clients to steer clear of the soybean complex, despite the fact that soybeans and soybean meal are on short and intermediate term buy signals and soybean oil is on a short-term buy signal, but an intermediate term sell signal. Weather markets are extremely difficult to trade and regardless of what side of the market you are trading, the viability the position will be determined by the weather.

Soybean meal:

September soybean meal advanced $17.20 and the October contract gained 15.10 on total volume of 90,364 contracts. Total open interest declined by 721 contracts, which relative to volume is approximately 65% less than average. The September contract accounted for loss of 932 of open interest. As this report is being compiled on September 4, September meal is trading $14.90 lower while the October contract is -14.10. Soybean meal remains on a short and intermediate term buy signal, but we caution clients against trading the market.

Soybean oil:

December soybean oil lost 10 points on volume of 98,875 contracts. Total open interest increased by 1,215 contracts, which relative to volume is approximately 45% less than average. The September contract lost 1,522 of open interest. As this report is being compiled on September 4, December soybean oil is trading 29 points lower. Soybean oil remains on a short-term buy signal, but an intermediate term sell signal.

Corn:

December corn lost 6.75 cents on volume of 236,720 contracts. Total open interest increased by 3,012 contracts, which relative to volume is approximately 45% less than average. The September contract accounted for loss of 5,946 of open interest. As this report is being compiled on September 4, December corn is trading 6.75 cents lower. Corn remains on a short and intermediate term sell signal.

Wheat:

December Chicago wheat lost 6.75 cents while the December Kansas City contract lost 4.50. Volume in Chicago wheat was 54,636 contracts and total open interest declined by 658 contracts, which relative to volume is approximately 50% below average. The September contract lost 579 of open interest. Both Chicago and Kansas City wheat remain on short and intermediate term sell signals. As this report is being compiled on September 4, Chicago wheat is trading 6.25 cents lower while the December Kansas City contract is -3.75. Both contracts are making new lows for the move.

From the August 25 Weekend Wrap:

“Although we are bullish the wheat market-Kansas City wheat in particular, the problem is that managed money has been aggressively increasing their net long exposure, however KC wheat has been declining. For example, from July 31 through August 20, which encompasses 3 COT periods, KC wheat has declined 0.50 cents, but the net long position of managed money has increased from 1.06:1 to 1.49:1. On the other hand, the commercial net short position has increased from 1.96:1 on August 6 to 2.45:1 on August 20.  In short, managed money has not been able to move KC wheat beyond unchanged from 3 weeks ago and commercial selling is keeping a lid on prices. This leads us to believe that if KC breaks down further, a mini avalanche of selling could occur because of the net long position of managed money.”

From the September 2 Weekend Wrap:

“Although we are bullish the wheat market-Kansas City wheat in particular, the problem is that managed money has been aggressively increasing their net long exposure, but KC wheat has been declining. For example, from July 31 through August 27, which encompasses 4 COT periods, KC wheat has declined 6.00 cents, but the net long position of managed money increased from 1.06:1 to 1.53:1. On the other hand, the commercial net short position has increased from 1.96:1 on August 6 to 2.62:1 on August 27. In short, managed money has not been able to move KC wheat higher from 4 weeks ago and commercial selling is keeping a lid on prices.”

“This leads us to believe that if KC breaks down further, a mini avalanche of selling could occur because of the net long position of managed money. From July 31 through August 27, KC open interest increased only 486 contracts, which shows lackluster interest. Even the mini rally in corn futures has been unable to light a fire under wheat. Corn prices will to a great extent determine the direction of wheat. The next downside target is $6.90, the low made on July 26 and 6.84, the low made on July 5. There is a lot to like about the wheat market, but it is not ready to make a move higher. Both Chicago and KC wheat remain on a short and intermediate term sell signal.”

Cotton:

December cotton lost 78 points on volume of 16,899 contracts. Total open interest declined by 2,507 contracts, which relative to volume is approximately 370% above average. Total open interest stands at 173,847 contracts, which is down dramatically from August 19 when open interest topped at 214,378 contracts and cotton made its high for the move at 93.54. Total open interest is the lowest since August 2 when it reached 173,061 contracts. On that day, December cotton closed at 84.98% and the close on September 3 was 82.71.

From the August 26 report:

“During the past 5 sessions beginning on August 20, open interest has declined by 28,837 contracts. The fact that open interest declined substantially on yesterday’s minor rally indicates those that remain long are looking to exit the market. This will keep a lid on any significant rally Cotton generated a short and intermediate term sell signal on August 22, and we think the market is headed to test the 78 cent level. Although it is conceivable  to see a larger than usual rally, clients can initiate bearish positions with an exit point above yesterdays high of 85.54 basis December.”

Live cattle:

October live cattle advanced 45 points on volume of 42,354 contracts. Total open interest increased by 1,352 contracts, which relative to volume is approximately 20% above average. The August contract lost 329 of open interest. As this report is being compiled on September 4, October live cattle is trading 45 points lower and has made a new low for the move at 1.25625. The essential problem is if the gap is filled between the August 7 low in the August 8 high, the chances are cattle will generate a short-term sell signal. Managed money is heavily long the cattle market and we see nothing but further selling pressure until weak longs are taken out of the market.

From the September 2 Weekend Wrap:

“From the time cattle generated a short and intermediate term buy signal on August 8 through August 30, October cattle has declined 0.22%, despite the fact that managed money has doubled their net long position. Apparently, commercial interests are keeping a lid on prices because the net short position of commercial interests has increased from 2.66:1 on August 6 to 3.46:1 on August 27. Due to the massive increase in speculative long positions, the market remains vulnerable to more corrective action, which will serve to wash out weak longs. There is a gap of approximately 1 cent between the high on August 7 and the low of August 8. We  are confident this will be filled before cattle begins a move that takes out the August 16 high of 1.29050.”

From the August 30 report:

“The market looks tired, and we expect the gap will be filled between the high of August 7 and the low of August 8. Additionally, the large number managed money longs should add selling pressure as prices move sideways to lower. Cattle remains on a short and intermediate term buy signal, but we advise clients to stand aside.”

Crude oil:

October crude oil advanced 89 cents on volume of 588,069 contracts. Total open interest increased by 11,158 contracts, which relative to volume is approximately 20% below average. The October contract lost 4,833 of open interest. As this report is being compiled on September 4, October crude oil is trading $1.41 lower. As we have said a number of times in previous reports, we are not bullish crude, but the threat of more Middle East tension is adding premium, and WTI remains on a short and intermediate term buy signal.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 3.0 million barrels from the previous week. At 362.0 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 0.6 million barrels last week and are in the upper half of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories decreased by 0.3 million barrels last week and are near the lower limit of the average range for this time of year. Propane/propylene inventories increased by 0.2 million barrels last week and are in the middle of the average range. Total commercial petroleum inventories increased by 2.2 million barrels last week.

Natural gas:

October natural gas advanced 8.5 cents on volume of 294,383 contracts. Total open interest declined by 1,088 contracts, which is minuscule and dramatically below average. The October contract lost 10,391 of open interest. Although open interest action has been neutral to slightly negative, the fact is the market has a very firm undertone, however as yet, market participants have not been willing to jump in on the long side.

From the August 29 report:

“The market should find support at $3.510, which was the low on August 29 and at 3.44. Natural gas should find resistance at the 200 day moving average of $3.68 and the 150 day moving average of $3.74. We advise clients to take advantage of any setback to initiate bullish positions. For futures traders, sell stops should be slightly below the August 29 low. We think options are great way to play the natural gas market, and at this juncture they are cheap.”

Gold:

December gold advanced $15.90 on heavy volume of 215,982 contracts.Volume was the highest since August 15 when 238,770 contracts were traded and December gold closed at $1360.90. On September 3, total open interest increased by 8,866 contracts, which relative to volume is approximately 55% above average. Interestingly, the open interest increase on September 3 was over 3 times the increase on August 27 when gold advanced 27.20. As a matter of fact, the open interest increased on September 3 was the largest since gold generated a short-term buy signal on August 9. The gold market topped at $1418.60 on August 29 and the volume and open interest spike on September 3 is likely indicative of a temporary top. Gold remains on a short and intermediate term buy signal.

As this report is being compiled on September 4, December gold is trading $21.80 lower and has made a low for the day at 1384.60. The high for the day is 1415.00,which is $1.40 below yesterdays high. As we have said previously, it does not appear that market observers believe in the gold rally with the exception of market action on September 3 when they rushed in en masse. Gold has much backing and filling to do, but we think a new bull market has begun. On August 9, December gold generated a short-term buy signal and this was confirmed by the generation of an intermediate term buy signal on August 26.

Silver:

December silver advanced 91.6 cents on volume of 73,099 contracts. Open interest increased by 526 contracts, which relative to volume is approximately 60% less than average. Note the difference in magnitude between the open interest increase in gold as opposed to silver. As we said in yesterday’s report, silver has more backing and filling to do, and as this report is being compiled on September 4, silver is trading 98.4 cents lower. Silver remains on a short and intermediate term buy signal.

Euro:

The September euro lost 39 points on fairly heavy volume of 267,106 contracts. Volume was the highest since August 15 when 315,563 contracts were traded and the September euro closed at 1.3349. The euro is getting close to generating a short-term sell signal, and we discourage the entering of long positions at this juncture.

Japanese yen: It is likely that the September yen will generate a short and intermediate term sell signal on September 4.

S&P 500 E mini:

The September S&P 500 E mini advanced 7.75 points on heavy volume of 2,350,735 contracts. Total open interest increased by 21,934 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on September 4, the E mini is trading 13.50 higher and has made a new high for the move at 1654.75. The 10 year note continues to decline with yields climbing to near record levels.We envision a scenario in which the 10 year yield makes another leg higher with the attendant fallout being that market indices fall sharply lower . We think the current rally is a fake out and that the market is headed lower . This is the perfect opportunity to initiate long puts, or write out of the money calls.