November soybeans lost 70.00 cents on volume of 276,836 contracts. Volume was the highest since July 25 when 279,165 contracts were traded and soybeans closed at $16.94 1/4. January and March contracts were also down the 70.00 cent limit. Open interest declined by 1,749 contracts, which in relation to volume is 70% less than average. Considering the higher than normal volume on Monday compared to the past 45 days, the open interest decline was disappointing. The harvest of soybeans is occurring at a rate more than double the five-year average, which means there is going to be additional hedge pressure by commercials earlier than usual. The market is top-heavy with speculative longs, and with the decline yesterday, many are showing losses. In order for the market to reach a point of stasis, we need to see more liquidation. This may take another couple of weeks. Stand aside.
October soybean meal closed down the $20.00 limit as did December, January and March contracts. Open interest declined by 1,121 contracts, which is approximately 50% less than average. During the past couple of weeks, we have seen a significant decline of open interest, and on September 14, open interest increased by 4,600 contracts while soybean meal declined $5.90. This indicated that new shorts were taking control. Like soybeans, we believe it will take another couple of weeks before it makes sense to enter long positions.
December corn declined by 34.00 cents on volume of 223,640 contracts. Volume was the highest since September 12, when 350,276 contracts were traded and corn declined by 8.25, while open interest increased by 14,025 contracts. Considering the front months of soybeans were locked down the limit for a portion of the session, it is surprising that corn volume was approximately 53,000 contracts less than soybeans. Open interest declined by 3,471 contracts, which in relation to volume is approximately 40% less than average. Like soybeans and soybean meal, corn is going to have to shed some of its speculative open interest before a bottom is truly in place.
December wheat lost 46.25 cents on relatively heavy volume of 91,156 contracts. Open interest declined by 8,633 contracts, which in relation to volume is approximately 325% above average. During September 13 and 14, open interest had increased by 19,943 contracts, therefore, it is to be expected that a major open interest decline would occur when wheat prices had a major decline. We remain positive on wheat, but with corn and the soybean complex vulnerable to further setbacks, speculators should continue to stand aside and wait for evidence of a bottom. The 50 day moving average on the wheat continuation chart is $8.71 1/2 and the 50 day moving average for the December contract is $8.88.
October crude oil fell by $2.38 on heavy volume of 719,538 contracts. Volume declined by approximately 109,000 contracts from September 14 when crude gained 69.00 cents and open interest increased by 26,640 contracts. On September 17, open interest declined by 27,684 contracts, which in relation to volume is approximately 35% above average. From August 15 through September 17, open interest has increased by 143,570 contracts while crude oil has advanced $2.00 in this time frame. The most recent COT report indicates that managed money is long crude oil by the highest ratio in a number of months. Considering the massive build of open interest during the past month, there will be major speculative selling pressure if crude continues to move lower. As clients of Open Interest Analyst know, we have been less than enthusiastic about the rally and have suggested that speculators stand aside.
On September 17, crude had a range of $4.87, which is more than 100% the 21 day average true range of $2.24, but volume declined from from September 14. On September 14, the range was $2.43, which is less than half of the range on September 17, but on September 14, volume was 828,091 contracts. On September 14, we noted that a new high on extremely heavy volume accompanied by a heavy increase in open interest often can signify a top or temporary top. Based upon the action of September 14 and 17, we suspect the high made on September 14, will stand for awhile.
October heating oil lost 7.61 cents on volume of 150,712 contracts. Open interest declined by 6,902 contracts, which in relation to volume is approximately approximately 50% above average. The trading range on Monday was 15.77 cents, or approximately 275% above its 21 day average true range of 5.59 cents. We have been saying that heating oil is overbought and that speculators should stand aside.
October gasoline lost 7.23 cents on volume of 164,976 contracts. Volume was nearly the same as September 14. On September 17, open interest declined by 8,882 contracts, which in relation to volume is approximately 85% above average. The trading range on Monday was 16.70 cents, which is approximately 250% above its 21 day average true range of 6.61 cents. As we have pointed out in prior reports, our view is that the big upside move in gasoline is over. Stand aside.
December copper lost 4.05 cents on volume of 59,179 contracts. Open interest increased by 1,171 contracts, which in relation to volume is approximately 20% below average. The high for copper on September 17 was $3.8300, which is a tad shy of the high made on September 14 of $3.8380. The market remains overbought and our concern about the performance of the Shanghai Composite Index provides us with a high degree of skepticism about how much farther copper prices can advance from the 3.80 level. As this report is being compiled on September 18, the Shanghai Composite Index is trading at 2059.54, which is only 30 points from its 3 1/2 year low of 2029.05. The performance of this index is telling us that China has problems that likely have not surfaced yet. In any event, copper is massively overbought and investors should stand aside.
December gold lost $2.10 on light volume of 126,276 contracts. Open interest declined by 2,575 contracts, which in relation to volume is approximately 15% less than average. Gold remains overbought relative to its 50 day moving average of $1638 and speculators should wait for a market pullback before entering long positions.
December silver lost 28.9 cents on light volume of 48,236 contracts. Open interest declined by 696 contracts, which in relation to volume is approximately 60% less than average. The market remains massively overbought and speculators should stand aside until the market pulls back.
The December euro lost 12 points on light of than normal volume of 247,221 contracts. Open interest declined by 1,810 contracts, which in relation to volume is approximately 70% less than average. The euro remains on a short and intermediate term buy signal, however, we view the rally as a garden-variety short squeeze and would prefer to wait until until the shorts are blown out, before looking at the bearish side. We believe the euro is in a long-term bear market and this is just another counter trend rally.
S&P 500 E mini:
The December. S&P 500 E mini lost 5.00 points on volume of 2,250,369 contracts. Open interest increased by 26,377 contracts, which in relation to volume is 70% less than average. Although we certainly think the market can rally higher, especially during the next two weeks, we continue to advise long put protection. We continue to like Apple Computer, but the stock is massively overbought relative to its 50 day moving average of $635. Speculators should exercise caution and make sure that they have stop protection in place to protect profits.