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Soybeans:

August soybeans advanced 5.50 cents on very light volume of 140,581 contracts. Volume was nearly half the volume traded on July 10 when the August contract advanced 5.75  cents on volume of 268,598 contracts and total open interest increased by 2,420. Additionally, volume was the lowest since May 18 when 144,236 contracts were traded and the August contract closed at 9.47 1/2.

On July 13, total open interest increased by 772 contracts, which relative to volume is approximately 75% below average. The July contract lost 401 of open interest, September -61, new crop November -603, but even taking the declines of open interest in the three months into account, the total open interest increase was abysmal.

However, unimpressive increases of total open interest have become a pattern in soybeans and this pattern is a major red flag. From July 8 through July 13 August soybeans have advanced 45.50 cents, but total open interest has increased only 7,365 contracts. This clearly shows that the amount of new buying is at minimal levels even though prices have advanced strongly.

Combine this with the terrible volume in yesterday’s trading, and a picture emerges of a market that is forming a top. As this report is being compiled on July 14, the August contract is trading 1.75 cents lower after making a daily high of 10.53 1/4, which takes out yesterday’s high of 10.40 1/2 and the July 10 high of 10.48 1/4, but is below the high for the move of 10.54 3/4 made on July 1. August soybeans remain on short and intermediate term buy signals.

Soybean oil:

August soybean oil advanced 32 points on volume of 82,236 contracts. Total open interest increased by a massive 6,238 contracts, which relative to volume is approximately 200% above average meaning that aggressive new buyers were entering the market in substantial numbers and driving prices higher (32.89), which slightly took out the July 10 high of 32.83.As this report is being compiled on July 14, the August contract is trading 31 points lower after making a daily high of 32.95. Maintain bearish positions originally recommended on June 23 and protect profits with appropriate stops. August soybean oil remains on a short and intermediate term sell signal.

Soybean meal:

August soybean meal advanced $1.10 on very light volume of 58,416 contracts. Volume was the weakest since May 11 when 56,668 contracts were traded and the August contract closed at $307.80. On July 13, total open interest declined by a substantial 1,310 contracts, which relative to volume is approximately 10% below average, but this follows the total open interest decline of 3,001 contracts on July 10 when the August contract gained 50 cents after making the new high for the move of 366.40.

There were open interest declines in the front months with July losing 298, August -1,351 and new crop December -1,397. Total open interest relative to price advances and declines has been acting in a very negative fashion and like soybeans, we think meal is in the process of topping. August soybean meal remains on short and intermediate term buy signals.

Corn:

September corn advanced 6.00 cents on volume of 364,013 contracts. Volume declined from July 10 when the September contract gained 6.00 cents on volume of 475,764 contracts and total open interest increased by 7,305 contracts. Additionally, volume was the lightest since July 8 when the September contract gained 1.25 cents on volume of 364,955 contracts and total open interest declined by 15,234.

On July 13, total open interest increased by a massive of 19,765 contracts, which relative to volume is approximately 120% above average meaning that aggressive new buyers were entering the market and driving prices to a new high for the move of 4.42.The July contract lost 975 open interest, September -2355.

We have two problems with yesterday’s action: 1) Volume declined substantially as prices advanced to new highs. 2) Total open interest increased by the largest amount since the rally began. For example, yesterday’s increase of total open interest exceeded that of June 30 (the day of the grain stocks and planting intentions report) when the September contract advanced the 30 cent daily limit on volume of 845,770 contracts and total open interest increased by 17,204.

In other words, new buyers were making commitments in the market in greater numbers on July 13 than on June 30 even though prices advanced by a fraction of the gain made on June 30 and volume was less than half of June 30.We suspect that speculators were on the buy side and commercials were on the sell side, which kept a lid on the gains .

Our diagnosis: Johnny-come-lately’s were entering the market at the high end of the range, which may signal that yesterday’s move and today’s new high of 4.43 1/4 may be the extent of the move. We have found throughout the years that massive open interest increases, and or large increases of volume at the high end of the trading range often indicate a top or temporary top. September corn remains on short and intermediate term buy signals.

Chicago wheat:

September Chicago wheat lost 0.25 cents on volume of 109,679 contracts. Total open interest increased by 3,584 contracts, which relative to volume is approximately 20% above average, and it appears that there was a battle between buyers and sellers and sellers were able to edge the market fractionally lower. The July contract lost 490 of open interest. As this report is being compiled on July 14, the September contract is trading 5.50 lower, and as we said in yesterday’s report, we think Chicago wheat is headed for a short term sell signal.

Live cattle: On July 13, August live cattle generated an intermediate term sell signal after generating a short-term sell signal on June 26

August live cattle lost 87.5 points on heavy volume of 81,709, which took out the recent high volume of 81,177 contracts traded on July 8 when the August contract lost 2.075 cents and total open interest declined by 6426.On July 13, total open interest declined by 3,317 contracts, which relative to volume is approximately 55% above average meaning liquidation was heavy in yesterday’s trading. The August contract lost 9,388 of open interest, December 2015 -829.

As this report is being compiled on July 14, the August contract is having its usual counter trend rally after the generation of a sell signal and trading 95 points higher on the day. Conceivably, the market will rally for another day or two before resuming its downtrend. Maintain bearish positions recommended in the July 1 report, and lower stops to protect profits.

Sugar #11: On July 13, October sugar generated a short-term buy signal, a remains on an intermediate term sell signal.

October sugar advanced 15 points on light volume of 78,643 contracts. Total open interest increased by 727 contracts, which relative to volume is approximately 50% below average. The October contract lost 1,813 of open interest. As this report is being compiled on July 14, the October contract has made a new high for the move at 12.80, which is the highest print since 12.79 made on June 2.

Now that October sugar is on a short term buy signal, the market should pull back from 1-3 days, however we do not think this is an opportunity to initiate bullish positions because the fundamentals of sugar are bearish. Sugar has a habit of making sharp moves to the upside only for these to reverse.

Natural gas:

August natural gas advanced 9.4 cents on volume of 408,262 contracts. Total open interest declined by 11,623 contracts, which relative to volume is average, but this confirms the recent pattern of open interest declines on price advances indicating that short sellers are powering the market higher, not new buyers. The August contract lost 21,511 of open interest.

As this report is being compiled on July 14, the August contract is trading 1.7 cents lower and has made a daily low of 2.822, which is below OIA’s key pivot point of 2.843 for the generation of a short-term buy signal.For a buy signal to occur, the low of the day must be above the pivot point.

Dollar index:

The September dollar index advanced by a strong 82.6 points on heavy volume of 46,628 contracts. Volume was below that of July 10 when the September contract lost 61.6 points on volume of 47,206 contracts and total open interest declined by 1,035. On July 13, total open interest increased by a disappointing 495 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on July 14, the September contract is trading 21.3 points lower on the day. The September dollar index remains on a short-term buy signal, but an intermediate term sell signal.

Euro:

The September euro lost 1.31 cents on volume of 254,672 contracts. Total open interest increased by a substantial 6,250 contracts, which relative to volume is average, but indicates that new short sellers were entering the market and driving prices lower. As this report is being compiled on July 14, the September contract is trading 13 pips above yesterday’s close and has made a daily low of 1.0974, which is below yesterday’s print of 1.1003. The September euro remains on a short term sell signal, but an intermediate-term buy signal. An intermediate term sell signal will be generated if the daily high is below OIA’s key pivot point for July 14 of 1.0975.

Yen:

The September yen lost 40 pips on volume of 114,363 contracts. Total open interest increased by 3,628 contracts, which relative to volume is approximately 10% above average, meaning that new short-sellers were entering the market at the lower end of the range and driving prices to .8100, which is the lowest print since .8087 made on July 2. The open interest increase in yesterday’s trading was the first negative signal seen during the recent decline, which began on July 9.

As this report is being compiled on July 14 the September contract is trading slightly above yesterday’s close. The September yen is at a critical juncture and will generate a short-term sell signal if the daily high is below OIA’s key pivot point for July 14 of .8090. The September yen generated a short-term buy signal on July 6, but remains on an intermediate term sell signal.