November soybeans lost 50.75 cents on volume of 281,729 contracts. Volume on September 20 exceeded the volume on September 18, of 277,417 contracts when soybeans declined by 29.00 cents and open interest declined by 3,952 contracts. Additionally, it surpassed the volume on September 17 when soybeans fell the daily limit of 70.00 cents and open interest declined by 1,749 contracts. On September 20, open interest increased by 3,372 contracts, which in relation to volume is approximately 60% less than average. Nonetheless, the fact that open interest increased on a massive decline indicates that longs have dug in and are not liquidating. This contrasts with the action in soybean meal in which participants are liquidating en masse. We are very bullish soybeans, but it is apparent more liquidation needs to occur before the market reaches a bottom. It is more than likely November soybeans will generate a short-term sell signal on September 21. Stand aside.
October soybean meal lost $17.40 on heavy volume of 97,147 contracts. Volume on September 20 surpassed the volume on September 18, when soybean meal lost $12.10 and open interest declined by 3,942 contracts. However, it did not surpass the volume on September 17 of 98,403 contracts when soybean meal closed down the $20.00 daily limit and open interest declined by 1,121 contracts. On September 20 open interest declined by 4,327 contracts, which in relation to volume is approximately 50% above average. The cumulative open interest decline relative to volume during the past four days has been approximately 15% above average. This is an astounding amount of liquidation in four days and in our view is a positive attribute. The open interest and price behavior of soybean meal versus soybeans has been vastly different. From September 17 through September 20, open interest in soybean meal has declined by 11,454 contracts while open interest in soybeans has declined by 2,323 contracts in the same time frame. During this time, soybean meal lost 8.05% while soybeans lost 6.91%.The open interest decline in soybean meal has been nearly 5 times the decline in soybeans, even though soybeans trade 250-300% greater volume than meal. Considering the magnitude of the soybean decline during the past four days, while open interest has declined by a mere 2,323 contracts provides additional evidence that speculators are digging in their heels. It is highly likely that soybean meal will generate a short-term sell signal on September 21. Stand aside for now.
December corn lost 10.50 cents on volume of 226,586 contracts. Open interest increased by 1,231 contracts, which in relation to volume is approximately 60% below average. Like soybeans, longs in corn have dug in and are refusing to liquidate, which indicates to us that more liquidation is ahead. Stand aside.
December wheat lost 2.00 cents on volume of 82,813 contracts. Open interest declined by 289 contracts. The market is acting extremely well and closed fractionally lower when the other grains markets were sharply lower. Despite disappointing export sales released by the USDA on Thursday, and that these are far behind previous years, the market was firm. If the grains move lower, especially corn, this could weigh on wheat prices. Speculators should carefully watch the performance of wheat versus the other grains. If wheat continues to hold up in the face of weakness of the grain complex, speculators can enter bullish positions.
Crude oil: On September 20, November oil generated a short-term sell signal.
November crude oil gained 12.00 cents on volume of 511,329 contracts. Open interest declined by 20,260 contracts, which in relation to volume is approximately 35% above average. During the past four days, open interest declined by 67,709 contracts, while crude prices have fallen $6.91. Although crude oil is on a short-term sell signal, do not short the market at current levels. Keep in mind that an intermediate term sell signal has not been generated. Stand aside.
November heating oil gained 5.06 cents on heavy volume of 179,536 contracts. Volume was the highest since August 27 when 214,920 contracts were traded. On September 20, open interest declined by 1,990 contracts, which in relation to volume is approximately 60% less than average. The fact that heating oil had terrific volume on the advance, but open interest declined is negative market action. Stand aside.
November gasoline gained 5.36 cents on volume of 165,095 contracts. Open interest increased by 3,627 contracts, which in relation to volume is approximately 15% below average. The volume price and open interest action in gasoline was far more favorable than it was in heating oil. Regardless, we continue to believe that speculators should stand aside, especially since crude oil generated a short-term sell signal.
December copper lost 5.50 cents on volume of 55,524 contracts. Open interest declined by 564 contracts. In previous reports, we made our thinking known about the problems in China and how this may affect copper consumption. We think the rally in copper is a countertrend rally, and the ultimate direction is lower. We suspect the rally is a product of a temporary dislocation of stocks at the major exchange warehouses. With global economies slowing down, it is hard to see how copper prices advance beyond the $3.80 level.
Gold: The 50 day moving average crossed above the 200 day moving average.
December gold lost $1.50 on volume of 155,789 contracts. Open interest increased by 1,108 contracts, which in relation to volume is 70% below average. As this report is being compiled on September 21, gold is made a new high at $1790.00. We continue to caution speculators about chasing the rally, and that new longs should wait for a setback of $50-$60 at the very least.
December silver gained 9.4 cents on volume of 49,229 contracts. Open interest increased by 761 contracts, which in relation to volume is approximately 40% less than average. Silver continues to be massively overbought and speculators should wait for a significant correction of approximately $2.00 before looking to enter on the long side.
The December euro close 93 points lower on volume of 277,767 contracts. Open interest declined by 4,875 contracts, which in relation to volume is approximately 30% less than average. The market action on September 20, was positive, and we continue to caution speculators against shorting this market.
S&P 500 E mini
The December. S&P 500 E mini gained 0.50 points on volume of 2,054,244 contracts. Open interest increased by 47,306 contracts, which in relation to volume is approximately 10% less than average. Long put protection should be in place.