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Soybeans:

September soybeans advanced 3.75 cents on light volume of 142,539 contracts. Volume declined from August 3 when the September contract lost 8.25 cents on volume of 145,707 contracts and total open interest increased by 146. Additionally, volume was the lowest since July 21 when soybeans advanced 11.00 cents on volume of 140,026 contracts.

On August 4, total open interest increased by 769 contracts, which relative to volume is approximately 75% below average, but a total open interest increase on yesterday’s minor price advance is positive. The August contract lost 889 of open interest, new crop November -415, which means there were sufficient open interest increases in the forward months to offset the decline in the two delivery months.

As this report is being compiled, the September contract is trading 11.25 cents higher and has made a daily high of 9.64 1/4, which is the highest print since 9.66 1/2 made on July 31. On August 3, September soybeans generated an intermediate-term sell signal, and is usually the case after the generation of the sell signal, the market has a tendency to rally from 1-3 days, and this is the second day of the rally.

Although, we may see an extension of the current rally, as we pointed out in prior reports, there remains an overhang of speculative longs who will likely be looking to liquidate as prices move higher. Unless, there is a major weather event, we expect soybeans to trade in a sideways pattern until next week’s USDA report. September soybeans remain on a short and intermediate term sell signal.

Soybean meal:

September soybean meal gained $1.20 on volume of 75,322 contracts. Total open interest declined by 780 contracts, which relative to volume is approximately 50% below average. The August contract lost 1,548 of open interest, and the October through January 2016 contracts lost a total of 1,226.

As this report is being compiled on August 5, the September contract is trading $5.20 higher and has made a daily high at 345.90, which is the highest print since 352.50 made on July 27. Remarkably, from July 23 through August 4 (9 days), total open interest declined each day and total open interest declined by a total of 32,359 contracts, while the September contract lost only $15.70 in this time frame.

This is heavy liquidation, yet prices are firm and the September contract has not been able to generate a short-term sell signal. 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 5 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.Thus far in trading on August 25, the daily low has been 337.60, which means that the earliest confirmation of a resumption of the rally would be tomorrow. September soybean meal remains on a short and intermediate term buy signal.

Corn:

September corn advanced 2.25 cents on light volume of 253,920 contracts. Volume was below that of August 3 when the September contract lost 4.50 cents on volume of 262,721 contracts and total open interest increased by 5,615. Additionally, volume was the lowest since July 23 when the September contract advanced 0.50 cents on volume of 253,608 contracts and total open interest declined by 7,194.

On August 4, total open interest declined by 1,687 contracts, which relative to volume is 65% below average. The September contract lost 6,688 of open interest, new crop December -1677. Yesterday, was the first total open interest decline since July 28 when corn advanced 2.00 cents on volume of 315,375 contracts and total open interest declined by a massive 16,006 contracts. Although, it is too early to tell, perhaps we are seeing the beginning of liquidation by managed money longs.

As this report is being compiled on August 5, the September contract is trading 2.50 cents higher and has made a daily high a 3.73 3/4, which takes out yesterday’s print of 3.72 3/4 and is the highest price since July 31 (3.77 1/2). Although September Chicago wheat is trading 9.25 cents higher on August 5, or +1.87%, September corn is trading +0.81% and compared to soybeans +1.19% and soybean meal +1.81%. In summary, other members of the grain complex are not pulling corn substantially higher.

The overhang of supply of futures contracts held by managed money continues to weigh on the market, and the commercial trade is undoubtedly aware of this. Until this supply is liquidated, rallies will be muted unless there is a major weather event and/or a major surprise in next week’s USDA report. September corn remains on a short term sell signal, but an intermediate term buy signal.

Dollar index:

The September dollar index advanced 40.8 points on volume of 37,567 contracts. Total open interest increased by a massive 2,808 contracts, which relative to volume is approximately 185% above average meaning aggressive new buyers were entering the market in large numbers and driving prices to a new high for the move (98.105).

As this report is being compiled on August 5, the September contract is trading 16.6 points higher and has made a daily high at 98.335, which fractionally takes out the July 20 print of 98.310 and the July 21 high of 98.295.We expect the dollar index to continue to make new highs this week. The September dollar index remains on a short and intermediate term buy signal.

S&P 500 E mini:

The S&P 500 E mini lost 8.00 points on volume of 1,331,980 contracts. Total open interest increased by 5,589 contracts, which is minuscule and dramatically below average, but an open interest increase on yesterday’s price decline is bearish. As this report is being compiled on August 5, the September contract is trading 10.50 points higher at 2093.50, but has made a daily high of 2107.00, which is the highest print since 2109.25 made on July 31.

Yesterday, we examined the moving averages of the New York Composite Index, which is comprised of 2200 issues traded on the New York Stock Exchange and the Dow Jones Industrial Average. We found that the 50 day moving average of both indices are trading below the 150 day moving averages. This is extremely negative.

Additionally, the very weak Dow Jones Transportation Index is in part confirming the bull market of the past six years is on its last legs.When all these factors are combined with the likelihood of an interest rate increase sometime this year and the relatively high price/earnings ratio of the S&P 500, we think clients must trade the equity market in a defensive manner. We continue to advocate the initiation of long option straddles or strangles in the December S&P 500 E mini contract.

On July 27, the September S&P 500 E mini generated a short-term sell signal, but remains on intermediate-term buy signal. Despite the rally attempts, the sell signal has not been invalidated. For a short-term buy signal to occur, the low of the day must be above OIA’s key pivot point for August 5 of 2099.05.