November soybeans gained 44.25 cents on volume of 248,828 contracts. Volume was the highest since August 1 when 266,281 contracts were traded and soybeans declined by 18.00 cents, while open interest increased by 1,016 contracts. On September 12, open interest increased by 4,804 contracts, which in relation to volume is approximately 30% below average. The volume was impressive, however the open interest increase was a disappointment because the less than average increase indicates speculators were unwilling to make significant commitments at higher prices. The USDA report was bullish and reported that the average bushel per acre was 35.3, which was below the estimate of 36.1. Export sales released on September 13, indicate for the latest week, there were net cancellations for 2011-2012 season totaling 58,200 metric tons, however export sales for the 2012-2013 season totaled 628,200. At this juncture, approximately 63% of the soybean crop has been sold, when only 4% of the crop has been harvested. We continue to believe that soybeans will drift lower and there will be an opportunity to acquire long positions at more favorable prices. As this report is being written on September 13, November soybeans are trading 6.25 cents lower and this is after the Federal Reserve has released its affirmative position on quantitative easing.
October soybean meal gained $13.40 on heavier than normal volume of 83,823 contracts. Volume was the highest since September 4, when 89,284 contracts were traded and soybean meal declined by $2.30 while open interest declined 5,083 contracts. On September 12, open interest increased by 1,815 contracts, which in relation to volume is slightly below average. The open interest increase on September 12 was the first increase since August 30, when soybean meal advanced $4.80 on volume of 87,686 contracts, while open interest increased by 1,679 contracts. For the recent reporting week, export sales totaled 217,600 metric tons, which is a positive number. Like soybeans, we are bullish on soybean meal, and are waiting for more favorable prices before suggesting bullish positions.
December corn declined by 8.25 cents on heavy volume of 350,276 contracts. Volume was the highest since August 13 when 363,844 contracts were traded and December corn closed at $7.92 1/4, while the front month September contract closed at $7.82 3/4. On September 12, open interest increased by 14,025 contracts, which in relation to volume is approximately 40% above average. The increase of open interest on the decline shows that the bears were in control on September 12. The reason for the price decline was that the USDA surprised speculators with a bearish estimate of 122.8 bushels per acre, which was above estimates of approximately 120 bushels per acre. The weekly export sales report released on September 13 showed sales totaled 215,800 metric tons, which is the third week in a row of significantly lower export sales. The market is doing its job of rationing supply, at least on the export front. On September 11, corn generated a short-term sell signal, and we suggest speculators stand aside. Do not enter new long positions, nor should new short positions be implemented. The market likely will trade lower during the next couple of weeks, but the downside is fairly limited.
December wheat gained 6.25 cents on fairly heavy volume of 91,992 contracts. Volume was the highest since August 22 when 99,682 contracts were traded and the front month September contract closed at $9.00 1/2 and the December contract closed at $9.22. Open interest increased by 71 contracts. The weekly export sales report released on September 13 showed that sales for wheat totaled 381,800 metric tons, which is disappointing. The USDA did not change its Australian production numbers, even though the Australian Department of Agriculture lowered estimated production down 3.5 million metric tons. We are bullish wheat, but more so in the next couple of months. The Federal Reserve release of the details of more quantitative easing has boosted December wheat by 8.25 cents. We will continue to monitor the market in order to determine the timing for entry on the long side.
October crude oil lost 16.00 cents on volume of 518,797 contracts. Volume was approximately 19,000 contracts less than trading on September 11 when crude advanced 63.00 cents and open interest increased by 20,521 contracts. On September 12, open interest increased by 7,570 contracts, which in relation to volume is 60% less than average. From August 15 through September 12, open interest has increased by 123,468 contracts while crude oil has advanced by a total of $2.39. As this report is being written on September 13, crude oil is trading $1.17 higher on the news of the Federal Reserve quantitative easing program. At its current price of $98.16, it is trading at the very high end of its recent trading range. The market has to close above its high of $98.29 made on August 23 if it is to move a couple of dollars higher. Although the trouble in Libya did not boost crude oil prices on September 12, if this escalates, especially in Libya, oil production could be affected, which would send crude higher. We believe the best position at this juncture is to stand aside.
October heating oil gained 2.95 cents on volume of 153,821 contracts. Volume increased by approximately 26,000 contracts from September 11, when heating oil gained 1.89 cents and open interest declined by 917 contracts. On September 12, open interest increased by 1,860 contracts, which in relation to volume is approximately 50% below average. On September 12, heating oil and gasoline diverged in their trading with gasoline trading significantly lower. While distillate supplies are significantly below their one year and five year average for this time of year, distillate demand is down as well. On August 6, heating oil generated a short-term buy signal and on August 8 generated an intermediate term buy signal. We suggest speculators wait until the market trades down to its 50 day moving average of $3.00 before contemplating long positions.
October gasoline closed 4.19 cents lower on heavy volume of 182,230 contracts. This is the highest volume since August 27 when 185,845 contracts were traded and the September contract made a high at $3.2050, which is the highest price since April 27. The market is continuing to deteriorate and as we have been saying for a number of weeks, there is no reason to be long gasoline.
Natural gas: On September 12, October natural gas generated a short and intermediate-term buy signal.
December copper lost .0045 cents on volume of 73,897 contracts. Volume increased approximately 17,000 contracts from September 11 when copper gained .0085 cents and open interest increased by 1,172 contracts. On September 12, open interest increased by 1,618 contracts, which in relation to volume is slightly less than average. The market made a new high at $3.7315, and as this report is being compiled, copper is trading 5.25 cents higher and has made a new high for the move at 3.7465. Undoubtedly, much of the move can be attributed to the Federal Reserve implementation of quantitative easing. The market is massively overbought and long positions should not be entered at current levels.
December gold lost $1.20 on heavy volume of 203,367 contracts. Volume increased by approximately 85,000 contracts from September 11 when gold gained $5.70 and open interest increased by 3,618 contracts. On September 12, open interest increased by 3,750 contracts, which in relation to volume is approximately 25% below average. As this report is being written on September 13, gold is trading $36.80 higher due to the Federal Reserve announcement. The market remains massively overbought and speculators should not enter new long positions at current levels. Wait for a setback.
December silver lost 27.4 cents on volume of 73,897 contracts. Volume nearly doubled from September 11, when 38,093 contracts were traded and open interest increased by 430 contracts while silver fell 6.7 cents. On September 12, open interest declined by 1,328 contracts, which in relation to volume is approximately 5% below average. On September 13, silver is trading $1.40 higher on quantitative easing and has made a new high for the move at $34.87. Do not enter new long positions at current levels.
The September Euro gained 33 points on huge volume of 522,852 contracts. Volume was the highest since June 13 when 527,443 contracts were traded and the September euro closed at 1.2589. On September 12, open interest increased by an astounding 22,607 contracts, which in relation to volume is approximately 45% above average. Also on September 12, the September Euro closed above its 200 day moving average for the first time since November of 2011. Very often a massive increase of volume accompanied by a very large increase in open interest can signal a major turning point. In this case, it is exactly the opposite. The September Euro has exploded again to the upside on September 13 and is currently trading 98 points higher. We have been warning speculators for weeks to stay away from the short side of this market and based upon the increases of open action during the past several days, the market looks like it will continue to move higher until the speculative shorts are blown out of the market. The upside move in the Euro may portend major financial disasters for some speculators.
S&P 500 E mini:
The September S&P 500 E mini closed 9.00 points higher on volume of 2,013,687 contracts. Volume increased by approximately 400,000 contracts from September 11, when the S&P 500 E mini gained 4.00 points and open interest increased by 12,145 contracts. On September 12, open interest increased by 52,841 contracts, which in relation to volume is an average number.
As this report is being compiled on September 13, the E mini is trading 22.75 points higher on heavy volume. Nearly 3,000,000 contracts have been traded and there is still an hour and a half left in the session. On Sunday September 9, we wrote about a possible outcome where the S&P E mini would trade no higher than 1459.90 and then reverse down to at least 1420.00. Furthermore, we stated if the market reached at least 1460 or beyond, the rally would continue. In addition, we stated if the rally were to continue the next target would be the December 31, 2007 high of 1484.50 and then the December 26, 2007 high of 1510.70.
The S&P 500 E mini has made a new high for the move at 1464.25, which breached the 1459.90 level, and therefore invalidates the reversal scenario down to 1420. It appears that the market is going to get everyone on board before it begins to head lower. We continue to recommend long put protection in the E mini or another major index. Additionally, we recommend that readers who took our advice to implement long positions after Apple Computer generated a short term buy signal on July 3, stay with these positions.