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Soybeans:

August soybeans advanced 5.75 cents on volume 268,598 contracts. Volume exceeded that of July 9 when the August contract gained 29.50 cents on volume of 238,975 contracts and total open interest increased by 5,852.On July 10 total open interest increased by 2,420 contracts, which relative to volume is approximately 50% below average. The July contract lost 755 of open interest, August -1449, which makes the total open interest increase more impressive (bullish).

As this report is being compiled on July 13, the August contract is trading 4.50 cents higher and has made a daily high of 10.38,which is below Friday’s high of 10.48 1/4. Although  total open interest increased in Friday’s trading, the fact remains is that it made its high just after the WASDE report was released and proceeded to trade lower for the rest of the session. If the market has any chance of taking out the high for the move of 10.54  3/4, made on July 1, it first must break through Friday’s high.

We think this is unlikely and that the market will struggle to move higher.In the weekend report we discussed in greater detail our thoughts about soybeans relative to the positioning of managed money. Unless this group gets more aggressive on the buy side, we do not see a path to higher prices unless a weather scare emerges.

Soybean oil:

August soybean oil advanced 5 points on volume of 115,176 contracts. Total open interest increased by massive 8,131 contracts, which relative to volume is approximately 185% above average meaning huge numbers of longs and shorts were entering the market and neither side was able to move the market substantially in either direction by the close. The July contract lost 249 of open interest.

As this report is being compiled on July 13, the August contract is trading 29 points above Friday’s close and has made a daily high of 32.72, which is below Friday’s high of 32.83. August soybean oil remains on a short and intermediate term sell signal, and we advise that bearish positions recommended on June 23 continue to be held with appropriate stops to protect profits.

Soybean meal:

August soybean meal gained 50 cents on volume of 117,301 contracts. Volume increased from July 9 when the August contract gained $11.30 on volume of 110,431 contracts and total open interest increased by 1,539.On July 10, total open interest declined by a substantial 3,001 contracts, which relative to volume is average, but an open interest decline of this magnitude after making a new high for the move of 366.40 is negative. The July contract lost of 708 of open interest, August -1,550, new crop December -3,879 indicating there was liquidation in the months that hold the overwhelming majority of total open interest.

As this report is being compiled on July 13, the August contract is trading 50 cents above Friday’s close.We think that soybean meal is the canary in the coal mine indicating that weakness is ahead for the soybean complex. Soybean meal has been the out performer, yet volume and open interest is telling us there is a lack of enthusiasm on the part of market participants.

From the July 9 report:

“Volume traded on July 9 is a definite disappointment when compared to previous sessions and indicates that many potential participants are on the sidelines.”

“Also, disappointing was the total open interest increase of just 1,539 contracts, which relative to volume is approximately 40% below average. The July contract lost 998 of open interest, August -1015. The disappointing volume and open interest action on July 9 is especially important because the August contract made a new high for the move of 357.80 on July 9 and has been the out performer in the soybean complex.”

From the July 12 Weekend Wrap:

“Like soybeans, managed money liquidated more positions than they added in this week’s report. This is not exactly a sign of confidence. Additionally, though soybean meal is the out performer, the ratio is slightly below that of soybeans. This indicates a reticence on the part of managed money to substantially increase long positions in the top performing commodity in the soybean complex.”

Corn:

September corn advanced 6.00 cents on volume of 475,764 contracts. Volume increased from July 9 when the September contract gained 4.25 cents on volume of 438,065 contracts and total open interest increased by 11,071.On July 10, total open interest increased by 7,305 contracts, which relative to volume is approximately 40% below average, however the July contract lost 823 of open interest, September -903.

On Friday, the September contract made a new high for the move of 4.39 1/4 and as this report is being compiled on July 13, the September contract is trading 2.25 cents higher and has made a daily high of 4.39. Of the grains we cover, we think corn has the best chance of continuing to make new highs in small increments, but clients must keep in mind the market is discounting any known potential negatives of the crop and corn tends to top during the month of July.

Chicago wheat:

September Chicago wheat lost 2.00 cents on volume of 136,348 contract. Total open interest declined by 1,787, which relative to volume is approximately 45% less than average. The July contract lost 300 of open interest, September -921, December -456. As this report is being compiled on July 13, the September contract is trading 4.75 cents lower and has made a daily low of 5.66 1/2, which is below Friday’s print of 5.68 1/2, and is the lowest price since 5.62 2/4 made on June 29. Although the September contract remains on a short and intermediate term buy signal, we think it is headed toward a sell signal.

Live cattle: August live cattle will generate an intermediate term sell signal on July 13 after generating a short-term sell signal on June 26.

August live cattle lost 1.00 cent on heavy volume of 80,229 contracts. Volume was the strongest since July 8 when the August contract lost 2.075 cents on volume of 81,177 contracts and total open interest declined by 6,426.On July 10, total open interest declined by 2,093 contracts, which relative to volume is average. The August contract lost 7,690 of open interest, December -403 and the market continues to shed open interest as prices decline.

We have pointed out in prior reports that total open interest is not increasing as prices decline, which indicates a reticence on the part of market participants to make new commitments. As this report is being compiled on July 13, the August contract has made a new low for the move of 1.46350, which takes out the April 30 low of 1.46500.

Managed money remains long live cattle by a ratio of nearly 6 to 1, which means there is plenty of fuel left to fund the continued downside move. Maintain bearish positions recommended in the July 1 report, but make sure that stops are lowered to protect profits.

WTI crude oil: This will be our last report on WTI crude oil until we announce a signal change or see a trading opportunity. On May 20, WTI generated a short-term sell signal and an intermediate term sell signal on July 3.

August WTI crude oil lost 4 cents on volume of 698,626 contracts. Total open interest declined by 4,185, which relative to volume is approximately 65% below average. The August contract lost 38,683 of open interest. As this report is being compiled on July 13, the August contract is trading 3 cents above Friday’s close.

Natural gas: It appears that natural gas may be on the verge of generating a short-term buy signal, and as a consequence we are resuming coverage.

August natural gas advanced 4.1 cents on volume of 288,266 contracts. Total open interest declined by 5,961 contracts, which relative to volume is approximately 20% below average. The August contract lost 21,557 of open interest. As this report is being compiled on July 13, the August contract is trading 9.3 cents above Friday’s close and has made a new high for the move of 2.883, which is the highest print since 2.885 made on July 2.

The August contract will generate a short-term buy signal is the low of the day is above OIA’s key pivot point for July 13 of 2.843. It should be noted that the 50 day moving average of 2.838 has crossed above the 100 day moving average of 2.833, which is a very positive development. Additionally, managed money is heavily short natural gas according to the latest COT report by a ratio of 1.71:1, which means there is plenty of fuel to fund the upside move if a buy signal is generated.

Dollar index:

The September dollar index lost 61.6 points on heavy volume of 47,206 contracts. Volume was the strongest since July 7 when the September contract advanced 47.1 points on volume of 50,970 contracts and total open interest increased by 4,610. On July 10, total open interest declined by 1,035 contracts, which relative to volume is approximately 15% below average, but an open interest decline on Friday’s setback is healthy open interest action, especially since the September dollar index generated a short-term buy signal on July 7.

The index remains on an intermediate term sell signal, but we expect this to change shortly.As this report is being compiled on July 13, the September contract is trading 67.3 points higher and has made a daily high of 96.950, which slightly takes out the July 9 high of 96.940. We see higher prices ahead. 

Euro:

The September euro advanced 1.16 cents on heavy  volume of 280,832 contracts.Volume exceeded that of July 7 when the September contract lost 72 pips on volume of 275,826 contracts and total open interest increased by 6,472. On July 10, total open interest declined by 1,113 contracts, which relative to volume is approximately 80% below average.

July 10 was the second day that the euro advanced and total open interest declined. On July 8, the September contract gained 85 pips on volume of 216,100 contracts and total open interest declined by 1,704. This is bearish open interest action relative to price advances, which confirms the downtrend. As this report is being compiled on July 13, the September contract is trading 1.15 cents below Friday’s close. On July 6, the September euro generated a short-term sell signal, but remains on intermediate term buy signal.

Yen:

The September yen lost 102 pips on volume of 144,577 contracts. Volume increased from July 9 when the September contract lost 48 pips on volume of 127,393 contracts and total open interest declined by 4,834. On July 10, total open interest declined by a massive 7,095 contracts, which relative to volume is approximately 100% above average meaning liquidation was extremely heavy on the decline. This is healthy open interest action, and as this report is being compiled on July 13, the September contract is trading 36 pips below Friday’s close and has made a low of .8100.

On July 6, the September yen generated a short-term buy signal, and today is the third day of the pullback. If the buy signal was not false, today should be the last day of the pullback and the yen should resume its uptrend tomorrow.

From the July 9 report:

“On July 6, the September yen generated a short term buy signal and the pullback just began on July 9. Perhaps there will be one more day of corrective activity before the yen resumes its uptrend.”