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Soybeans:

September soybeans lost 27.25 cents on volume of 226,900 contracts. Volume exceeded that of August 10 when the September contract gained 32.75 cents on volume of 215,231 contracts and total open interest increased by an abysmal 821 contracts. On August 11, total open interest declined just 366 contracts. The August contract lost 497 of open interest, September 2015 -1,152, new crop November 2015 -1,690. In summary, liquidation was light considering the magnitude of the decline.

As this report is being compiled after the release of the USDA report, September soybeans are trading sharply lower, down 57.25 cents or -5.76%.We have been concerned about the very large long position held by managed money, and this group of speculators will be forced to liquidate as prices near the September contract low of $8.98 1/2 made on June 1. September soybeans remain on a short and intermediate term sell signal.

Soybean meal:

September soybean meal lost $11.90 volume of 98,414 contracts. Total open interest increased by 1,402 contracts, which relative to volume is approximately 40% below average, but surprisingly, the total open interest increase on yesterday’s decline was the first since July 20 when soybean meal lost $5.10 on volume of 83,882 contracts and total open interest increased by 1,372 contracts. The August contract lost 371 of open interest, September 2015 -1,320, which means there were sufficient open interest increases in the forward months to offset the declines in the two delivery months and increase total open interest.

As this report is being compiled after the release of the USDA report, September soybean meal is trading $14.90 lower and has made a daily low thus far of 320.70, which is considerably above the contract low for the contract of 288.10 made on June 1. In order for the September contract to generate a short term sell signal, the high of the day must be below OIA’s key pivot point for August 12 of $342.30. It is likely that a short term sell signal will be generated tomorrow and an intermediate term sell signal is not far off either. Like soybeans, managed money is heavily long soybean meal. This group will add selling pressure as the market moves lower.

Corn:

September corn lost 13.75 cents on volume of 423,516 contracts. Volume contracted dramatically from August 10 when the September contract gained 17.50 cents on volume of 564,021 contracts and total open interest increased by 10,216. On August 11, total open interest declined by 9,642, which relative to volume is approximately 10% below average. The September 2015 contract lost 9,268 of open interest and the September 2016 contract lost 167.

As this report is being compiled on August 12 after the release of the USDA report, the September contract is trading 16.75 cents lower and has already hit the 30 cent limit down print of 3.46 1/2, which is a new contract low and takes out the previous contract low of 3.52 made on June 16.

In the weekend report, we pointed out the positioning of managed money based upon the latest COT report. In essence regardless, of the direction of the move after the release of the USDA report, one side or the other was going to get hurt badly due to the recent initiation of short positions by managed money at the lower end of the trading range and on the other hand, large numbers of managed money longs who are holding losing positions. As a result of today’s report, there is a large contingent of managed money longs with substantial losses,  and they will force corn prices lower.

Our target: the continuation contract low of 3.18 1/4 made by the December 2014 contract the week of September 29, 2014.

From the August 9 Weekend Wrap:

“The set up is as follows: Managed managed money longs are holding large numbers of losing positions and new managed money shorts have initiated their positions at the bottom end of the trading range, approximately 20 cents from the contract low for the September contract. As a consequence, there could be some major fireworks resulting from the August 12 report.”

Chicago wheat: This will be our last report on Chicago wheat until we announce a signal change or see a trading opportunity.

September Chicago wheat lost 18.25 cents on heavy volume of 190,585 contracts. Volume exceeded that of August 6 when the September contract gained 5.00 cents on volume of 184,709 contracts and total open interest declined by 1,099. On August 11, total open interest declined by 2,764 contracts, which relative to volume is approximately 40% below average. The September contract lost 16,664 of open interest.

As this report is being compiled on August 12 after the release of the USDA report, September Chicago wheat is trading 12.75 cents lower and is the out performer in the grain complex. September Chicago wheat remains on a short and intermediate term sell signal.

Coffee: On August 11, September and December New York coffee generated short and intermediate term buy signals.

September coffee gained 3.70 cents on heavy volume of 79,970 contracts. Volume was slightly below that of August 10 when the September contract gained 5.70 cents on volume of 80,051 contracts (the highest volume for 2015) and total open interest declined by 415 contracts.

On August 11, open interest declined again, this time by 3,497 contracts, which relative to volume is approximately 35% above average meaning liquidation was heavy on yesterday’s advance. The September contract lost 10,428 of open interest, which means there were insufficient open interest increases in the forward months to completely offset the decline in the September contract. In summary, for the past two days, September coffee has advanced 9.40 cents while total open interest has declined by 3,912 contracts. This is troubling. 

As this report is being compiled on August 12, the September contract is pulling back by 3.25 cents after making a new high for the move of 1.3805, which takes out yesterday’s print of 1.3755. Usually, after the generation of buy signals, the market has a tendency to pull back from 1-3 days and this is the most opportune time to initiate bullish positions if you are inclined. We are not recommending bullish positions due to the very weak Brazilian real and the terrible open interest action during the past two days.

Cocoa: September and December cocoa will likely generate intermediate-term sell signals on August 12 after generating short-term sell signals on July 27.

Silver: On August 11, September and December silver generated short term buy signals, but remain on intermediate-term sell signals.

September silver lost 8 ticks on heavy volume of 75,249 contracts. Volume was the strongest since August 7 when the September contract gained 14.4 cents on volume of 75,267 contracts. On August 11, total open interest declined by 2,531 contracts, which relative to volume is approximately 20% above average. The September contract lost 7,192 of open interest. As this report is being compiled on August 12, the September contract is trading 20.6 cents higher and has made a new high for the move of 15.57, which is the highest print since $15.90 made on July 13. We have no recommendation at this juncture. Do not chase the rally.

Gold:

December gold advanced $3.60 on volume of 205,248 contracts. Total open interest increased by 4,166 contracts, which relative to volume is approximately 20% below average. As this report is being compiled on August 12, the December contract is trading $15.50 higher and has made a daily high 1125.50. In order for December gold to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point for August 12 of $1125.70.

Dollar index:

The September dollar index gained 13.3 points on volume of 46,431 contracts. Total open interest declined by 202 contracts, which relative to volume is approximately 70% below average. As this report is being compiled on August 12, the September contract is trading sharply lower, down 1.145 points due to the devaluation of the Chinese yuan.

The euro was being used as a carry trade currency (short the euro long the Chinese yuan) and this trade is unwinding, which is boosting the euro. A short-term sell signal in the dollar index will be generated if the daily high is below OIA’s key pivot point for August 12 of 96.911 and the high on August 12 has been 97.375. It is likely that a short-term sell signal will be generated tomorrow.

Euro:

The September euro gained 11 pips on volume of 260,042 contracts. Total open interest declined by 3,011 contracts, which relative to volume is approximately 45% below average, but this is the third open interest decline in a row on price advances.

From August 7 through August 11, the September euro has gained 1.09 cents while total open interest as declined by 10,305 contracts. As of the latest COT report, leverage funds are short the euro by a ratio of 2.83:1, which means there is enough fuel to send the euro higher.

We think the move is temporary and once sufficient numbers of short-sellers have been blown out, for the euro to continue its advance new buyers must be willing to step up to make purchases at the upper end of the trading range. We think this is unlikely.

In order for the September euro to generate a short term buy signal, the low of the day must be above OIA’s key pivot point for August 12 of 1.1042 and the low thus far on August 12 has been 1.1028. It is likely that a short term buy signal will be generated tomorrow.

S&P 500 E mini:

The September S&P 500 E mini lost 20.00 points on heavy volume of 1,789,155 contracts.Volume was the strongest since July 27 when the September contract lost 13.00 points on volume of 1,784,714 contracts and total open interest increased by 23,944. On August 11, total open interest increased by 30,150 contracts, which relative to volume is approximately 35% below average, but yesterday’s open interest increase on a price decline is bearish, and continues the pattern that we have been discussing for many weeks.

As this report is being compiled on August 12, the September contract is trading 10.50 lower after making a daily low of 2046.50, which is the lowest print since 2044.75 made on July 10. We continue to advocate the initiation of long option straddles or strangles in the December S&P 500 E mini contract.