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Soybeans:

September soybeans lost 62.50 cents on very heavy volume of 428,732 contracts. Volume was the strongest since June 30 when 503,063 contracts were traded in the September contract closed at 10.41 1/2. On August 12, total open interest increased by 10,716 contracts, which relative to volume is average. The August contract lost 639 of open interest and the January 2016 contract lost 380. There were open interest increases in the March 2016 through November 2018 contracts with the exception of March 2017, which lost 4 of open interest.

New short-sellers were driving prices lower, and as the individual delivery months indicate (August 2015 and January 2016), there was very little long liquidation. As a result, speculators holding long positions now have very large losses, and this will continue to weigh on the market. Yesterday, September soybeans made a new low for the move of 9.11, which is only slightly above the contract low of 8.98 1/2 made on June 1.

Although, the market is due for a bit of a bounce, short sellers have substantial profits and unless there is some major weather event, we do not see the impetus for a major short covering rally. Additionally, there is no reason for fresh buyers to step in and try to catch a falling knife. The large contingent holding spec long positions will be looking to exit positions on rallies, which will contain advances.

Soybean meal: September, October and December soybean meal will generate short term sell signals on August 13.

September soybean meal lost $18.00 on heavy volume of 201,029 contracts. Volume was the strongest since June 30 when 192,303 contracts were traded and the September contract closed at $348.30. Volume on August 12 was the highest of 2015. On August 12, total open interest declined 3,053 contracts, which relative to volume is approximately 40% below average. The August contract lost 447 of open interest, September 2015 -3,854, December 2015 -2,826.

Considering the magnitude of yesterday’s move, it is remarkable that liquidation wasn’t heavier. The September contract made a low of 320.70, which is the lowest print since $317.00 made on June 25. The substantial speculative long position will continue to pressure the market. Additionally, soybeans and soybean oil are on short and intermediate term sell signals and soybean meal is on a short term sell signal with an intermediate-term sell signal not far off. This confirms the bearish set-up going forward. In order for an intermediate term sell signal to occur, the high of the day must be below OIA’s key weekly pivot point of 319.40.

Corn The September and December  corn contracts will generate intermediate term sell signals on August 13. On July 27, September and December corn generated short-term sell signals.

September corn lost 19.25 cents on heavy volume of 777,037 contracts. Volume was the strongest since June 30 when 845,770 contracts were traded and the September contract closed at 4.22. On August 12, total open interest increased by a sizable 17,765 contracts, which relative to volume is approximately 10% below average. Yesterday’s total open interest increase is bearish. The September contract lost 22,460 of open interest, which means there were large open interest increases in the forward months to offset the decline in the September contract. The December 2015 through December 2018 contracts all gained open interest.

Yesterday’s open interest increase is a continuation of a price and open interest dynamic that we have written about wherein short-sellers continue to be in control of the corn market. Although, we expect to see managed money long positions trimmed in the upcoming COT report, we suspect there will be a large contingent of long positions remaining, which will continue to pressure prices.

Yesterday, the September contract sliced through the previous contract low of 3.52 with a new contract low of 3.46 1/2. As we said in yesterday’s report, we see corn taking out the low of 3.18 1/4 made the week of September 29, 2014. There is no compelling reason for new buyers to step in and attempt to catch a falling knife.

Cocoa: On August 12, September and December 2015 cocoa generated intermediate term sell signals after generating short-term sell signals on July 27.

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

September cocoa lost $47.00 on volume of 60,659 contracts. Total open interest declined by 962 contracts, which relative to volume is approximately 40% below average. The September contract lost 9,622 of open interest. As this report is being compiled on August 13, the September contract is trading $10.00 lower, and has made a new low for the move of $3,000.00, which is the lowest print since $2,975.00 made on May 12.

Coffee:

September coffee lost 5.35 cents on heavy volume of 76,353 contracts. Volume was below that of August 10 and 11, but at the upper end of the range. On August 12, total open interest declined by a massive 4,511 contracts, which relative to volume is approximately 140% above average meaning liquidation was extremely heavy on the decline. The September contract lost 9,388 of open interest.

For the past three sessions beginning on August 10 through August 12, September coffee has advanced 4.05 cents, yet total open interest has declined by 8,423 contracts.This is negative and in order for coffee to advance, new buyers must be willing to step up and pay ever increasing prices.

As this report is being compiled on August 13, the September contract is trading 5.55 cents higher, a reversal of yesterday’s action and has made a daily high of 1.3800, which is fractionally below yesterday’s print of 1.3805. The decline on August 12 is the first since the generation of buy signals on August 11. Usually, after the generation of buy signals, the market pulls back from 1-3 days and based upon recent total open interest action, a further pullback is likely.

On August 11, September and December coffee generated short and intermediate term buy signals. We have no recommendation.

Cotton:

December cotton advanced 2.87 cents on very heavy volume of 62,768 contracts.Volume traded on August 12 was the highest of 2015. On August 12, total open interest increased by 405 contracts, which is a major disappointment considering the magnitude of the move and is 65% below average. The October and December 2015 contracts lost a total of 1,102 of open interest. As this report is being compiled on August 13, the December contract is trading 1.74 cents higher and has made a daily high 66.47, which is the highest print since 67.23 made on July 10.

In order for the December contract to generate a short term buy signal, the low of the day must be above OIA’s key pivot point for August 13 of 64.97 and  the low thus far and trading has been 64.09. For an intermediate term buy signal to be generated, the low of the day must be above OIA’s key pivot point for August 13 of 65.42. The real test will be in tomorrow’s trading and whether the market has the strength to make lows above the pivot points. Also, it will be important that total open interest substantially increase in today’s trading.

Dollar index: If the high of 96.840 holds on August 13, the September and December dollar index will generate short-term sell signals.

The September dollar index lost 1.040 on heavy volume of 76,353 contracts.Volume was the strongest since June 15 when 83,796 contracts were traded and the September contract closed at 95.102. On August 12, total open interest declined by a massive 4,511 contracts, which relative to volume is approximately 140% above average meaning liquidation was extremely heavy on the decline. As this report is being compiled on August 13, the September contract is trading 19.5 points higher and has made a daily high 96.840, which is below OIA’s key pivot point for the generation of a sell signal on August 13 of 96.880.

Euro: The September and December Euro will generate short-term buy signals on August 13.

The September euro advanced 1.39 cents on heavy volume of 314,778 contracts. Volume was the strongest since July 31 when 316,797 contracts were traded and the September contract closed at 1.0971. On August 12, total open interest increased by 3,206 contracts, which relative to volume is approximately 50% below average, but an open interest increase on yesterday’s large advance is positive.

For the prior three days when prices advanced, total open interest declined.The open interest increase on August 12 when the euro advanced is the first since August 5 when the September contract gained 4 pips on volume of 239,666 contracts and total open interest increased by 5,165.

With the dollar index on a sell signal and the euro on a buy signal, it appears that the path of least resistance for the euro is higher and the dollar index lower. Additionally, the British pound-euro cross (GBP/EUR) looks to generate a sell signal on August 13.

This is significant because it indicates the pound is weakening against the euro and the pound has been a strong currency against all the other major crosses including the dollar. We know that the euro was a carry trade currency against the Chinese  yuan, and as we pointed out yesterday, this trade is unwinding, which provides strength to the euro and weakness to the yuan.