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Soybeans: On August 3, September soybeans generated an intermediate term sell signal after generating a short-term sell signal on July 28.

September soybeans lost 8.25 cents on light volume of 145,707 contracts. Volume was below that of July 31 when the September contract lost 11.25 cents on volume of 150,577 contracts and total open interest declined by 609. Additionally, volume was lowest since July 21 when soybeans gained 11.00 cents on volume of 140,026 contracts and total open interest increased by 6,574.

On August 3, total open interest increased just 146 contracts. However, the August contract lost 2,012 of open interest and the September and November contracts lost a total of 58, which means there were sufficient open interest increases in the forward months to offset most of the decline in the three delivery months. As this report is being compiled on August 4, the September contract is trading 10.75 cents higher and has made a daily high 9.57, which takes out the high of August 3 (9.53 1/2), but is below the print of July 31 (9.66 1/2).

As is typical after the generation of a sell signal, the market tends to have a counter trend rally, which last from 1-3 days and normally this would be the opportunity to initiate bearish positions. However, we discourage this because soybeans are in their critical development stage and anything weatherwise can happen. We expect the market to have intermittent rallies. But as we have said numerous times, there is a major supply overhang of long positions by speculative traders and this will put a lid on advances unless there is a major weather event or a surprise in next week’s USDA report.

Soybean meal:

September soybean meal lost $2.40 volume of 72,180 contracts. Total open interest declined just 161 contracts. The August contract lost 1,063 of open interest, September 2015 -82, which means there were sufficient open interest increases in the forward months to offset a substantial amount in both delivery months.

As this report is being compiled on August 4, the September contract is trading $1.50 higher on the day and has made a daily high of 341.40, which takes out yesterday’s print of 339.70, but is below the July 31 price of 344.50. The September contract has not broken below yesterday’s low of 334.80. As mentioned in yesterday’s report, the massive liquidation seen during the past several sessions is an ominous sign for soybean meal and we expect it to generate a short-term sell signal shortly.

For September soybean meal to generate a short-term sell signal, the high of the day must be below OIA’s key pivot point for August 4 of $332.80. The rally will resume if the September contract makes a daily low above OIA’s key pivot point for August 4 of 340.80. 

Corn:

September corn lost 4.50 cents on lackluster volume of 262,721 contracts. Volume was the weakest since July 23 when the September contract gained 0.50 cents on volume of 253,608 contracts and total open interest declined by 7,194. On August 3, total open interest increased by 5,615 contracts, which relative to volume is approximately 20% below average, but an open interest increase on yesterday’s decline is bearish. The September contract lost 6,391 of open interest and there were open interest increases in the December 2015 through March 2017 contracts.

The COT report was compiled on July 28 and from July 29 through August 3, total open interest increased by each day bringing the increase for the four-day period of 18,932 contracts while the September contract lost 8.50 cents. In summary, massive open interest increases are fueling price declines, and at the same time confirming that speculators are not liquidating. Perhaps it will take next week’s USDA report to trigger massive liquidation on the part of managed money speculators, but regardless, they will liquidate and the only question remaining is when.

As this report is being compiled on August 4, the September contract is trading 2.75 cents above yesterday’s close and has made a daily high at 3.72 3/4, which takes out yesterday’s print of 3.70 1/2, but is below the high for July 31 of 3.77 1/2. On July 27, OIA announced that September and December 2015 corn generated short-term sell signals, but they remain on intermediate term buy signals. We expect an intermediate term sell signal will be generated, and this will occur if the daily high is below OIA’s key pivot point for August 4 of 3.69 1/8 for the September contract.

Dollar index:

The September dollar index gained 17.7 points on volume of 30,758 contracts. Total open interest declined by 740 contracts, which relative to volume is average. As this report is the compiled on August 4, the September contract is trading 19.9 points higher on the day. The big report affecting the dollar index will be the employment report released by the US Department of Labor this Friday. The reason: the Federal Reserve will be scrutinizing the results of the report, and this will likely influence the Federal Reserve Board whether to raise interest rates in their September meeting.

10 Year Treasury Note: On August 3, the September 10 year treasury note generated an intermediate term buy signal, after generating a short term buy signal on July 6.

The September 10 year treasury note advanced 12.5 points on volume of 976,324 contracts. Total open interest declined by 6,501 contracts, which relative to volume is approximately 70% below average. As this report is being compiled on August 4, the September note is trading 11.5 points lower, which is typical after the generation of an intermediate term buy signal. Usually, markets have a pullback after the buy signal is generated and this can last from 1-3 days.