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On August 12, the USDA will release its monthly WASDE report.

On August 10, there is a rally across the board in grains, metals, the petroleum complex and equities. December gold is trading $12.60 higher, October platinum + $26.60 and September silver +50.9 cents, or +3.43%. September copper is trading sharply higher as well, up 7.10 cents, or +3.04%.

Soybeans:

September soybeans advanced 19.50 cents on volume of 182,305 contracts. Volume was the strongest since July 30 when soybeans advanced 7.50 cents on volume of 187,715 contracts and total open interest increased by 4,719. On August 7, total open interest declined by 1,932 contracts, which relative to volume is approximately 50% below average, but a total open interest decline on Friday’s strong price advance is bearish. There were open interest decreases across the board with August losing 602, September -1,039, new crop November -2,072, and January 2016 -274.

In summary, both longs and shorts were liquidating as prices moved higher on August 7, and as this report is being compiled on August 10, the September contract is trading sharply higher again, this time by 24.25 cents, or +2.49% and has made a daily high of $10.00, which is the highest print since 10.07 3/4 made on July 23.

It appears that soybeans (and the rest of the grain complex) are undergoing position squaring in advance of the August 12 WASDE report. Since the rally began on August 4, September soybeans have advanced 30.50 cents, while total open interest has increased 6,453 contracts. While this is not exactly a barn burner, it is positive open interest action relative to the four day price advance.

Despite the positive price action during the past four days, September soybeans have remained on a short and intermediate term sell signal, and a short-term buy signal will be generated if the daily low is above OIA’s key pivot point for August 10 of 9.90. The low on August 10 is 9.77 3/4. It is important for total open interest to increase substantially to validate today’s price advance. We have no recommendation to make at this juncture except to advise clients to remain on the sidelines until after the release of the report.

Soybean meal:

September soybean meal advanced $5.10 on volume of 81,763 contracts. Volume was the strongest since August 5 when the September contract gained $6.30 on volume of 95,632 contracts and total open interest increased by 3,366. On August 7,  total open interest increased by a massive 4,638 contracts, which relative to volume is approximately 120% above average meaning that large numbers of new buyers were entering the market and driving prices higher ($345.80), which was slightly below the August 5 print of 345.90.

As this report is being compiled on August 10, the September contract is trading sharply higher, up $7.90, or +2.29% versus soybeans trading +2.41% and has made a daily high of 354.80, which is the highest print since 356.00 made on July 23. Additionally, September soybean meal has made a daily low 345.00, which is above OIA’s key pivot point of 342.50, which indicates the uptrend is in force.

At this juncture, it appears a test of the July 16 high of 363.30 is imminent.The strength of soybean meal will give support to soybeans, at least until the release of the August 12 report. We have no recommendation to make except that clients should remain on the sidelines until after the release of the August 12 report.

As we pointed out in the August 6 report, soybean meal had to make a low above our pivot point for the up trend to resume, and accomplished this on August 10

From the August 6 report:

“Despite the advance on August 7, the September contract has made a daily low with 338.60, which is below OIA’s key pivot point for August 7 of 341.20 for the resumption of the uptrend. Unless the September contract makes a daily low above the pivot point, September soybean meal will trade sideways to lower. “

Corn:

September corn advanced 3.00 cents on volume of 355,537 contracts. Volume exceeded that of August 5 when the September contract gained 4.00 cents on volume of 349,954 contracts and total open interest increased by 9,813. On August 7, total open interest increased by 8,013 contracts, which relative to volume is approximately 10% below average. The September contract lost 18,373 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in September and increase total open interest.

As this report is being compiled on August 10, the September contract is trading sharply higher, up 14.75 cents or +3.89% and is the out performer in the grain complex on August 10.The September contract has made a daily high of 3.90 1/2, which takes out the previous high print of 3.89 1/4 made on July 27.

As we pointed out in the August 9 weekend report, there is an interesting set up in corn: Managed money longs are holding a large position showing losses for the most part. The new managed money short-sellers entered corn with 61,255 new short positions according to the latest COT report. Here is the interesting part: The trading range encompassed by the COT report (July 29-August 4) was 3.65 – 3.77 3/4, which means on August 10 the 61,000 plus new short-sellers are showing losses and undoubtedly most managed money longs are holding losers as well.

In summary, it will be interesting to see what total open interest does on August 10. Will new short sellers be liquidating and powering the market higher and will longs holding losses liquidate prior to the report? Despite the move higher on August 10, for September corn to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point for August 10 of 3.99. We have no recommendation except to say clients should be on the sidelines prior to the report.

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:

September Chicago wheat advanced 3.50 cents on heavy volume of 169,407 contracts. Volume declined from 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 7, total open interest declined by 1,064 contracts, which relative to volume is approximately 65% below average, but the total open interest decline is bearish and is the second one in a row. The September contract lost 10,604 of open interest, March 2016 -436, which means there were sufficient open interest increases in the forward months to offset a good portion of the decline in the two delivery months. This is actually fairly impressive.

As this report is being compiled on August 10, the September contract is trading 13.25 cents higher, or +2.64% and has made a daily high of 5.30, which takes out the previous high of 5.28 1/4 made on July 22. Despite the sharp move higher on August 10, in order for the September contract to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point for August 10 of 5.49 1/2. We have no recommendation except to say that clients should remain on the sidelines until after the release of the USDA report.

Dollar index:

The September dollar index lost 28.7 points on heavy volume of 59,482 contracts. Volume was the strongest since July 31 when the September contract lost 25.5 points on volume of 62,088 contracts and total open interest declined by 462. On August 7, total open interest increased by 656 contracts, which relative to volume is approximately 45% below average, but an open interest increase on Friday’s decline is negative.

As this report is being compiled on August 10, the September contract is trading 45.9 points lower on relatively low volume and has made a daily low of 97.080, which is the lowest print since 96.375 made on July 31. The sharply lower dollar index on August 10 is giving a boost to the commodities complex.

As we pointed out in the August 6 report, we expected the euro to rally to its 50 day moving average and therefore expected more losses in the dollar index. As this report is being compiled on August 10 on the euro is trading 54 pips higher and has made a daily high of 1.1047, which is below the 50 day moving average of 1.1101.

From the August 6 report:

“We think the dollar index will eventually move higher, but the euro needs to weaken, and this currency comprises approximately 58% of the movement of the dollar index. Conceivably, we could see the euro rally up to its 50 day moving average of 1.1099 before rolling over.  This means that additional losses should be expected in the dollar index.”

Euro:

The September euro advanced 50  pips on volume of 265,107 contracts. Total open interest declined by 2,841 contracts, which relative to volume is approximately 50% below average, which is bearish open interest action on Friday’s advance. The September contract will generate a short-term buy signal if the daily low is above OIA’s key pivot point for August 10 of 1.1029.

S&P 500 E mini:

The September S&P 500 E mini lost 6.00 points on volume of 1,604,635 contracts. Total open interest increased by a massive 47,254 contracts, which relative to volume is approximately 5% above average, meaning that aggressive new short-sellers were entering the market in very heavy numbers at the very bottom of the trading range and driving prices to a new low for the move of 2062.00.

What we saw on Friday were the Johnny-come-lately’s entering the market at the very bottom of the trading range. As this report is being compiled August 10, the September E mini has reversed sharply, trading up 24.50 points on low volume likely blowing out Friday’s short sellers.

On August 10, the September contract has made a high of 2098.50, and for the short term sell signal, which was generated on July 27 to reverse, the low of the day must be above OIA’s key pivot point for August 10 of 2098.65. In summary, on August 10 the market has only been able to touch the pivot point, not make a daily low above it. This will be the key test for tomorrow’s trading.