Soybeans:

September soybeans lost 37.75 cents while the November contract lost 34.25 on volume of 215,031 contracts. Total open interest increased by 8,363 contracts, which relative to volume is approximately 50% above average meaning that new shorts were entering the market and driving prices lower. The September contract lost 895 of open interest. It was somewhat surprising to see open interest increase due to the fairly large net long position of managed money. As this report is being compiled on September 5, September beans are trading 19.75 cents higher while the November contract is +11.25. November soybeans remain on a short and intermediate term buy signal.

Soybean meal:

September soybean meal lost $16.80 while the October contract lost 15.50 on total volume of 81,878 contracts. Total open interest declined by 3,890, which relative to volume is approximately 75% above average, meaning that heavy liquidation was the order of the day in soybean meal. Note the difference of open interest action between soybeans and soybean meal. The September contract lost 536 of open interest. October soybean meal remains on a short and intermediate term buy signal.

Soybean oil:

December soybean oil lost 26 points on volume of 76,920 contracts. Total open interest increased by 385 contracts, which relative to volume is approximately 75% below average. The September contract accounted for loss of 961 of open interest. Soybean oil remains on a short-term buy signal, but an intermediate term sell signal. The buy signal is proving to be very weak, which means it is likely soybean oil will reverse to a sell signal.

Corn:

December corn lost 5.75 cents on volume of 168,307 contracts. Total open interest declined by 3,869 contracts, which relative to volume is approximately 10% below average. The September contract accounted for loss of 4,105 of open interest. As this report is being compiled on September 5, December corn is trading 8.25 cents lower and has made a new low for the move at $4.57. It appears inevitable that corn is headed for the August 13 low of $4.45 3/4. Corn remains on a short and intermediate term sell signal.

Wheat:

December Chicago wheat lost 1 cent while the KC December contract lost 1 cent as well. Total volume for the Chicago contract was 58,703 contracts and open interest increased by 1,015 contracts, which relative to volume is approximately 35% below average. The September contract accounted for loss of 1,031 contracts. As this report is being compiled on September 5, December Chicago wheat is trading 4.25 lower and the KC contract is trading -5.75. Both contracts remain on short and intermediate term sell signals.

Cotton:

December cotton gained 4 points on light volume of 11,012 contracts. Open interest declined by 575 contracts, which relative to volume is approximately 100% above average, meaning that heavy liquidation continues in cotton. As this report is being compiled on September 5, December cotton is trading 62 points lower and has made a new low for the move at 82.11. On August 22, cotton generated a short and intermediate term sell signal. On August 26, we recommended that clients initiate bearish positions with an exit point of 85.54 for  those holding futures contracts. Stay with these because we think the market is headed toward the 78 cent area.

Live cattle:

October live cattle lost 20 points on volume of 30,535 contracts. Total open interest declined by 524 contracts, which relative to volume is approximately 45% less than average. The October contract accounted for loss of 4,041 contracts. As we said in the September 2 Weekend Wrap: “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.”

As this report is being compiled on September 4, October cattle is trading 62 points lower and has made a new low for the move at 1.25200. Cattle remains on a short and intermediate term buy signal, but we want to see more liquidation by managed money, and whether cattle can remain on a buy signal during the corrective phase.

Crude oil:

October crude oil lost $1.31 on light volume of 472,131 contracts. Total open interest increased by 2,736 contracts, which relative to volume is approximately 70% less than average. The October contract lost 7,244 of open interest. As this report is being compiled on September 5, the high for the day has been $108.54, which is slightly below the high of September 4 of 108.61, and the September 3 high of 108.83. On August 30, the high was 108.75. In short, it appears that crude oil is finding resistance near the 109.00 level. We think the market looks tired, and suspect the linchpin that keeps prices elevated is the threat of an attack on Syria and the blowback that may occur as a result of it. Crude oil remains on a short and intermediate term buy signal.

Natural gas:

October natural gas advanced 1.7 cents on volume of 283,359 contracts. Total open interest declined by 8,385 contracts, which relative to volume is approximately 20% above average, meaning that liquidation was heavier than normal on a modest rise in price. The October contract lost 13,053 of open interest. On August 29, natural gas generated a short-term buy signal, but currently remains on an intermediate term sell signal. As this report is being compiled on September 5, October natural gas is trading 9.1 cents lower, based upon the latest Energy Information Administration storage report. As we have said before, open interest action has not been positive despite the solid performance and firm undertone of the market. Natural gas is struggling to stay above the 200 day moving average of $3.68 on the continuation chart, and therefore a setback to the 50 day moving average of $3.57 is to be expected. The market should find support at $3.55. Rather than enter new long positions on today’s setback, we would prefer to wait until tomorrow. The employment report will be released and we can better determine whether the current pullback has run its course. 

Working gas in storage was 3,188 Bcf as of Friday, August 30, 2013, according to EIA estimates. This represents a net increase of 58 Bcf from the previous week. Stocks were 210 Bcf less than last year at this time and 43 Bcf above the 5-year average of 3,145 Bcf. In the East Region, stocks were 115 Bcf below the 5-year average following net injections of 43 Bcf. Stocks in the Producing Region were 100 Bcf above the 5-year average of 985 Bcf after a net injection of 12 Bcf. Stocks in the West Region were 58 Bcf above the 5-year average after a net addition of 3 Bcf. At 3,188 Bcf, total working gas is within the 5-year historical range.

Gold:

December gold lost $22.00 on volume of 150,927 contracts. Open interest declined 7,738 contracts, which relative to volume is approximately 100% above average, meaning that liquidation was heavy. This is positive open interest action relative to the price decline. As this report is being compiled on September 5, December gold is trading $17.50 lower and has made a new low for the move at 1364.70. As we have said in past reports, gold needs to do backing and filling over a longer time frame in order to build a base for a sustained move higher. One impediment to higher precious metal prices are rising interest rates, and it appears that the 3.00%  on the 10 year note will be breached within the next day. As interest rates move higher, they are going to have a negative impact on most commodity markets  and equities. Gold remains on a short and intermediate term buy signal.

From the September 3 report:

“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.”

Silver:

December silver lost $1.014 on volume of 51,944 contracts. Considering the magnitude of the decline, the low volume was impressive and compares favorably to trading on August 30 when December silver lost 62.7 cents and volume totaled 47,043 contracts. It is positive to see volume expand on rallies and shrink when price declines. On September 4, open interest declined by 1,455 contracts, which relative to volume is average.This is positive as well. As this report is being compiled on September 5, silver is trading 14 cents lower and has made a new low for the move at $23.04. Silver remains on a short and intermediate term buy signal.

Euro:

The September euro gained 38 points on volume of 174,961 contracts. Open interest increased by 2,798 contracts, which relative to volume is approximately 35% less than average. It is likely the euro will generate a short and intermediate term sell signal on September 5.

Yen: On September 4, the September Japanese yen generated a short and intermediate term sell signal.

S&P 500 E mini:

The S&P 500 E mini gained 14.50 points on volume of 1,669,000. Open interest increased by 15,697 contracts, which relative to volume is approximately 50% below average. The market continues to move higher despite sharply higher long-term interest rates, and in our view this paradox will be resolved with either interest rates coming down sharply, or equities declining sharply. We think higher interest rates are ahead, and at some point will cause a massive correction in equities. Long put protection should be in place, especially for those holding equity positions.