Soybeans:

September soybeans advanced 25.25 cents while the November contract gained 15 on total volume of 167,720 contracts. Open interest skyrocketed higher by 9,668 contracts, which relative to volume is approximately 140% above average meaning that new longs were aggressively entering the market and pushing prices higher. The September contract lost 633 contracts of open interest. The total open interest increase was the largest since August 28 when September beans advanced 19 cents (November +2.25) and open interest increased by 10,181 contracts on volume of 199,173. The USDA reported that 5,100 tons of soybeans were sold for the 2012-2013 season and 844,100 tons sold for 2013-2014. As report is being compiled on September 6, September beans are rallying 9.50 cents while the November contract is losing 4.75. Soybeans remain on a short and intermediate term buy signal, but we discourage clients from being involved in the market at this juncture.

Soybean meal:

 September soybean meal advanced $10.90 while the October contract gained 6.60 on total volume of 71,125 contracts. Total open interest increased by 3,697 contracts, which relative to volume is approximately 110% above average, meaning that new longs were aggressively entering the market and pushing prices higher. The September contract lost 433 of open interest. The USDA reported that 57,800 tons were sold for 2012-2013 and 84,300 tons sold for 2013-2014. As this report is being compiled on September 6, September meal is trading $2.50 lower while the October contract is -4.30. We discourage clients from entering positions in this market.

Soybean oil:

December soybean oil lost 40 points on volume of 73,499 contracts. Open interest declined by 2,069 contracts, which relative to volume is average. The September contract lost 863 of open interest. The USDA reported that 9,200 tons were sold for the 2012-2013 season and there were cancellations totaling 2,400 tons for the 2013-2014 season. As this report is being compiled on September 6, December soybean oil is trading 67 points higher and has made a high of 44.46, which is its highest price since September 3 when it reached 45.10. Soybean oil remains on a short-term buy signal, but an intermediate term sell signal.

Corn:

December corn lost 8.50 cents on volume of 180,130 contracts. Total open interest increased by 7,435 contracts, which relative to volume is approximately 55% above average, meaning that new shorts were entering the market in substantial numbers and driving prices lower. The September contract lost 3,748 of open interest. The USDA reported there were cancellations totaling 113,200 tons for the 2012-2013 season and for 2013-2014, 328,300 tons were sold. As this report is being compiled on September 6, December corn is trading 2.25 cents higher. Corn remains on a short and intermediate term sell signal.

Wheat:

December Chicago wheat lost 6 cents while the December KC contract lost 8.75. Chicago wheat volume totaled 55,865 contracts and open interest increased by 376 contracts, which relative to volume is approximately 65% less than average. The September contract accounted for loss of 298 of open interest. The USDA reported robust sales for the 2013-2014 season of 668,300 tons. Thus far for the 2013-2014 season 53% of US wheat is committed for export for the season which ends on May 31, 2014. The current pace of exports is the highest since 2007-2008. Although we are conceptually bullish wheat, the market has not cooperated by moving higher. Both Chicago and KC wheat remain on short and intermediate term sell signals.

Cotton:

December cotton lost 45 points on volume of 15,057 contracts. Open interest declined by 2,933 contracts, which relative to volume is approximately 570% above average, meaning liquidation continues to be off the charts since August 19. As a matter of fact, open interest has declined every single day since August 19. In the report of August 26, we recommended that clients initiate bearish positions and that futures traders use the exit point of 85.54 to liquidate short positions. Stay with bearish positions. We think cotton is headed lower.

Live cattle:

October live cattle lost 77.5 points on relatively heavy volume of 52,340 contracts. Total open interest declined by 2,407 contracts, which relative to volume is approximately 75% above average meaning that liquidation was extremely heavy. The October contract lost 4,993 of open interest. October cattle made a new low for the move at 1.25125, and on September 6, as this report is being compiled, October cattle has made another new low at 1.24850. We are friendly to the long side of cattle, but want to see the gap filled between the August 7 high and August 8 low. Also, we want to see the number of net longs held by managed money pared down.

Crude oil:

October crude oil advanced $1.14 on very light volume of 387,047 contracts. Volume was the lowest since August 26 when 297,359 contracts were traded and crude oil declined 50 cents while open interest increased by 2,517 contracts. On September 5, open interest increased by 10,163 contracts, which relative to volume is average. The October contract lost 5,118 of open interest. As this report is being compiled on September 6, October crude is trading $1.92 higher and has made a new high for the move at 110.45 while Brent is trading 93 cents higher. Apparently, the situation in Syria has gotten even more serious with Russia promising to support Assad, the dictator of the country. It will be interesting to see whether crude has the momentum to reach its previous high of $112.24 made on August 28. We think the fundamentals for crude are negative, but geopolitical tensions are overriding fundamentals. WTI remains on a short and intermediate term buy signal.

Natural gas:

October natural gas lost 10.8 cents on heavier than normal volume of 348,359 contracts. Volume was the highest since August 22 when 368,568 contracts were traded and October natural gas closed at $3.575. On September 5, open interest increased by 4,757 contracts, which relative to volume is approximately 40% below average. We consider the increase of open interest on the decline as very negative. The performance of natural gas during September 5 and as we compile this on September 6 has been abysmal. Previously, we have commented on the unimpressive open interest action on the advance, and this has been of major concern. In yesterday’s report, we advised clients to hold back on entering new long positions to see how natural gas would trade during today’s session.

It appears that natural gas may have generated a false buy signal on August 29. Additionally, our concern is that the decline to the 50 day moving average of $3.570 should have been a natural point of stasis, but instead, natural gas has made a new low of $3.518. We suggest that any bullish positions that may have been initiated upon the generation of the short-term buy signal be liquidated. Additionally no new positions should be entered on the long side. At the very least, if natural gas is to have any staying power, it should close at least unchanged, or higher on September 6. The one saving grace for September 6 is that volume is extremely light on the decline.

Gold:

December gold lost $16.60 on volume of 182,385 contracts. Open interest increased by 2,062 contracts, which relative to volume is approximately 45% less than average. As this report is being compiled on September 6, December gold is trading $15.60 higher and has made a high of 1393.60. As we have said before, gold has much backing and filling to do before a base is established from which a sustainable move can occur.

Silver:

December silver declined 16 cents on volume of 44,116 contracts. Open interest declined by 245 contracts, which relative to volume is approximately 70% below average. As this report is being compiled on September 6, December silver is trading 60.5 cents higher. We expect to see more backing and filling before silver forms a base from which it can make a sustainable move higher.

Euro:

The September euro lost 87 points on heavy volume of 317,218 contracts. Volume was exceeded trading on August 15 when 315,563 contracts were traded and the September euro closed at 1.3349. It did not surpass volume on July 31 of 336,390 contracts when the September euro closed at 1.3339. On September 5, open interest increased by 6,874 contracts, which relative to volume is approximately 15% below average, but this open interest action reinforces the bearish trading in the euro. That managed money is heavily net long according to last week COT report will add fuel to the downside. The euro will likely generate a short-term sell signal on September 6.

Australian dollar: On September 5, the September Australian dollar generated a short-term buy signal, but remains on an intermediate term sell signal.

S&P 500 E mini:

The S&P 500 E mini lost 0.50 points on light or than normal volume of 1,281,589 contracts. Open interest declined by 20,510 contracts, which relative to volume is approximately 35% less than average. Although the employment report was a big disappointment, the E mini is rallying and so is the 10 year note based upon the possibility that the Federal Reserve will postpone or reduce its bond buying program. On August 27, the September E mini generated a short-term sell signal, but never generated an intermediate term sell signal. As this report is being compiled on September 6, the E mini is trading 9.75 points higher and has made a new high for the move at 1663.50. We continue to believe risk is to the downside and advise the purchase of long put protection, especially for those who hold long equity positions.