Soybeans: On September 30, November soybeans generated a short-term sell signal and will likely generate an intermediate term sell signal on October 1

November soybeans lost 37.00 cents on heavy volume of 261,897 contracts. Volume was the highest since September 12 when 320,575 contracts were traded and soybeans advanced 37.75 cents while open interest increased 10,866 contracts. Total open interest declined by 3277 contracts, which relative to volume is approximately 45% below average.

When you compare the volume on the decline on September 30 to the volume on the advance of September 12 and the open interest decline on September 30 to the open interest advance on September 12, the only conclusion we come to is that soybeans have much further to fall. During the week that encompassed September 12, the COT report, which was tabulated on September 17 showed that managed money was long by a ratio of 7.83:1. The most recent COT report showed that managed money was long soybeans by 9.52:1. In short, managed money as of last Tuesday was far more bullish on soybeans than they were 2 weeks earlier when beans were priced at a much higher level. The tepid decline of open interest on a major move to the downside, in which November soybeans sold at their lowest price since August 19, is further confirmation of more downside.

The grain stocks report showed that stocks as of September 1 were 17 million bushels above expectations. A break to $12.50, would be a decisive new low on the soybean continuation chart that was made on July 5 at 12.60 3/4. As this report is being compiled on October 1, November soybeans are trading 17.50 cents lower at have made a new low for the move at 12.63 1/2.

Soybean meal:

December soybean meal lost $12.90 on heavier than normal volume of 94,066 contracts. Total open interest declined by 4,670 contracts, which relative to volume is approximately 100% above average, meaning that liquidation was extremely heavy, and by far, much more so than soybeans. The October contract accounted for loss of 2,089 of open interest. Without question, soybean meal will generate a short-term sell signal on October 1.

Corn:

December corn lost 12.50 cents on heavy volume of 320,558 contracts. Volume was the highest since August 26 when 445,229 contracts were traded and December corn closed at $5.00 1/2. Total open interest increased by 12,957 contracts, which relative to volume is approximately 55% above average meaning that new shorts were entering the market and driving prices lower. Although, we have been bearish on corn for quite some time, we remain concerned about the number of new shorts entering the market, and the likelihood of a near-term short covering rally. The USDA report was very bearish, and showed stocks as of September 1 at 824 million bushels, which is dramatically above expectations of 681 mb. Corn is trading at its lowest price since September 2010 and remains on a short and intermediate term sell signal.

Wheat:

December Chicago wheat declined 4.50 cents while the December Kansas City contract advanced 7.75. Volume in Chicago wheat totaled 108,829 contracts and total open interest declined by 552, which relative to volume is approximately 75% below average. Kansas City wheat volume totaled 34,145 contracts and open interest increased by a massive 4,341 contracts, which relative to volume is approximately 280% above average, meaning that new longs and shorts were entering the market aggressively, and longs were pushing the market higher while the December Kansas City contract made a new high for the move at $7.46 3/4. The Chicago contract made a new high for the move at $6.94 3/4, but closed lower on the day. The USDA reported that all wheat stocks totaled 1.855 billion bushels versus expectations of 1.915 bb. Export sales thus far in the season have been nothing short of terrific, and with the sharply lower dollar, US wheat will continue to be competitive on the world market. On September 25, December Chicago and Kansas City wheat generated short-term buy signals and on September 27, December Kansas City wheat generated in intermediate term buy signal. Chicago wheat has not yet generated an intermediate term buy signal.

Cotton:

December cotton advanced 58 points on volume of 17,176 contracts. Volume fell approximately 7,200 contracts from September 27 when cotton advanced 1.16 cents and open interest increased by 8,282 contracts. On September 30, open interest increased by another massive number of 5,086 contracts, which relative to volume is approximately 885% above average. On September 26, total open interest stood at 187,088 contracts and 2 sessions later stood at 200,456. This is a huge open interest increase when considering that December cotton advanced only 1.74 cents in this time frame. The cotton harvest is significantly below its five-year average, and this may be creating concerns about an early frost damaging some of the crop.

Live cattle:

December live cattle lost 10 points on volume of 39,129 contracts. Total open interest increased by 293 contracts, which relative to volume is approximately 60% less than average. The October contract lost 2,245 of open interest. We think the market is in a corrective mode, and we look for more downside before the market resumes its uptrend. December cattle remain on a short and intermediate term buy signal.

Crude oil:

November crude oil lost 54 cents on total volume of 443,262 contracts. Total open interest declined by 6,468 contracts, which relative to volume is approximately 40% less than average. On September 23, crude oil generated a short-term sell signal, but as of October 1 will not generate an intermediate term sell signal, but is getting close. The market has been unable to rally after the sell signal, which underscores its weakness. As an alternative, we have suggested to clients they write out of the money calls.

Natural gas:

November natural gas lost 2.9 cents on volume of 224,064 contracts. Total open interest increased by 2,613 contracts, which relative to volume is approximately 50% below average. On September 25, November natural gas generated a short-term sell signal, and as this report is being compiled on October 1, natural gas has had a modest rally and is currently trading 4.9 cents higher. Natural gas remains on an intermediate term sell signal, and we expect lower prices ahead.

Euro:

The December euro advanced 6 points on volume of 159,426 contracts. Total open interest increased by 2,075 contracts, which relative to volume is approximately 45% less than average. As this report is being compiled on October 1, the December euro has made a new high for the move at 1.3591, which takes out the high of 1.3573 made on September 19. The euro remains on a short and intermediate term buy signal.

Australian dollar:

The December Australian dollar advanced 7 points on volume of 71,993 contracts. Total open interest declined by 3,716 contracts, which relative to volume is approximately 100% above average, meaning that both longs and shorts were liquidating even though the market did not move much. As this report is being compiled on October 1, the December Australian dollar is trading 63 points higher, and appears headed for the high of 94.76 made on September 18. Managed money is short the Australian dollar by a ratio of 1.81:1, which is about the high of 2 weeks ago when they were short by 1.83:1.

S&P 500 E mini:

The S&P 500 E mini lost 12.25 points on volume of 2,159,255 contracts. Total open interest declined by 15,338 contracts, which relative to volume is approximately 60% below average. As this report is being compiled on October 1, the E mini is trading 8.75 points higher and has made a high of 1690.50. We continue to advise the initiation of long put protection, if this is not been done already.