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Soybeans:

August soybeans lost 4.00 cents on volume of 193,196 contracts. Volume increased from July 13 when the August contract gained 5.50 cents on low volume of 140,581 contracts and total open interest increased by 772. On July 14, total open interest increased by 3,675 contracts, which relative to volume is approximately 20% below average, but an open interest increase on yesterday’s decline is negative. Additionally, it is the first open interest increase on a price decline since July 6 when the August contract lost 16.00 cents on volume of 186,563 contracts and total open interest increased by 1,942.The July contract lost 166 of open interest, August -435.

We have three major problems with yesterday’s action and all are negative. First, the high of 10.53 1/4 was made in the evening session of July 13, and after making the high, soybeans never attempted to test it on the 4 hour chart. If you look at the 4 hour chart, soybeans have been trading lower ever since.

Second, yesterday’s open interest increase indicates those who have initiated new long positions are not yet liquidating, and this will apply pressure to prices if they continue to move lower.

Third, volume increased on yesterday’s decline from July 13 when soybean prices advanced 5.50 cents on the lowest volume since May 18, which indicates potential market participants were on the sidelines.We have been cautioning clients that soybeans were topping, and though soybeans remains on a short and intermediate term buy signal, it appears that the path of least resistance is lower.

Soybean oil:

August soybean oil lost 34 points on volume of 100,591 contracts. Total open interest increased by 550 contracts, which relative to volume is approximately 75% below average, and yesterday’s open interest increased on a price decline is negative. The July contract gained 39 of open interest, but the August contract lost 3,381. As this report is being compiled on July 15, the August contract is trading 84 points lower and trading on the lows of the day. August soybean oil generated a short-term sell signal on June 18 and an intermediate term sell signal on July 8. On June 23, we advised the initiation of bearish positions and we recommend these continue to be held with appropriate stop loss protection.

Soybean meal:

August soybean meal gained 50 cents on volume of 91,261 contracts. Total open interest increased by 2,445 contracts, which relative to volume is average. The August contract lost 1,332 of open interest. Yesterday, it appears that a battle ensued between buyers and sellers and neither side was able to move the market much by the close. Yesterday, the August contract made a high of $363.80, which is below the July 10 high of 366.40. As this report is being compiled on July 15, the August soybean meal contract is trading down 0.17%, August soybeans -1.45%, and August soybean oil -2.41%. We think soybean meal is topping along with soybeans and that lower prices are ahead. August soybean meal remains on short and intermediate term buy signals.

Corn:

September corn lost 12.50 cents on volume of 443,838 contracts. Remarkably, volume was below that of July 10 when the September contract advanced 6.00 cents on volume of 475,764 contracts and total open interest increased by 7,305 contracts.On July 14, total open interest increased by 3,046 contracts, which relative to volume is approximately 65% below average, however, an open interest increase on yesterday’s decline is negative. The July contract lost 471 of open interest, March 2016 -474, September 2016 -268, which makes the total open interest increase more impressive (bearish).

The fact that volume did not accelerate on yesterday’s decline is very much a positive, however, it would have been much more favorable had open interest declined along with price. In short, yesterday’s decline did not shake out any new longs, but this is a double edged sword: if prices continue to move lower, new longs who are beginning to lose profits and incur losses will be forced to liquidate as prices decline. Yesterday’s high of 4.43 1/4 was made in the evening session of July 13, and on the 4 hour chart the September contract never attempted to retest it. Despite this, we would not be surprised to see a test of yesterday’s high, but as we have said in prior reports, corn has a distinct tendency to top in the month of July. September corn remains on short and intermediate term buy signals.

Chicago wheat:

September Chicago wheat lost 4.75 cents on volume of 110,784 contracts. Total open interest increased by 1,999 contracts, which relative to volume is approximately 25% below average, but an open interest increase on yesterday’s decline is negative. The July contract lost 73 of open interest, September -736. As this report is being compiled on July 15, the September contract is making new lows for the move and has taken out the June 29 low of 5.62 3/4. Like the rest of the grain complex, we see lower prices ahead and that short and intermediate term sell signals will be generated in the not-too-distant future. Keep in mind that the dollar index is on a short-term buy signal, and we see the index continuing to advance, which will dampen grain prices across the board.

Live cattle:

August live cattle gained 55 points on volume of 72,682 contracts. Volume was the lowest since July 7 when the August contract lost 57.5 points on volume of 41,043 contracts and total open interest declined by 1,629. On July 14, total open interest increased by 1,012 contracts, which relative to volume is approximately 45% below average. The August contract lost 5,593 of open interest. Maintain bearish positions originally recommended in the July 1 report and lower stops to protect profits. We see lower cattle prices ahead. August live cattle remain on short and intermediate term sell signals.

Lean hogs: This is a one-day report due to the strong advance in yesterday’s trading. We are not  resuming regular coverage.

August lean hogs advanced 1.975 cents on volume of 58,516 contracts.Volume was the strongest since July 9 when 63,819 contracts were traded and the August contract lost 2.525 cents. On July 14, total open interest declined by 509 contracts, which relative to volume is approximately 50% below average, but a total open interest decline on yesterday strong advance is decidedly bearish.

The July contract lost 210 of open interest, August -6,752, December 2015 -380. In short there was liquidation across the board on yesterday’s big move. August lean hogs remain on short and intermediate term sell signals, and for a short term buy signal to occur in the August contract, the low of the day must be above OIA’s key pivot point for July 15 of 76.600. We doubt the market has the strength to accomplish this and as this report is being compiled on July 15, the August contract has made a daily high of 76.400, which is below yesterday’s high of 76.875 and currently is trading 90 points lower on the day.

Natural gas:

August natural gas lost 2.4 cents on volume of 372,551 contracts. Total open interest declined by 3,510, which relative to volume is approximately 50% below average. The August contract lost 10,105 of open interest. As this report is being compiled on July 15, the August contract is trading 6.6  cents above yesterday’s close and has made a daily high of 2.929, which is below yesterday’s high of 2.934.

Although natural gas has been unable to generate a short-term buy signal, it is remarkably resilient and refuses to stay down for long. For the August contract to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point for July 15 of 2.849, and the low thus far on July 15 has been 2.832. Tomorrow, is the EIA natural gas storage report and this will probably determine whether natural gas generates a short-term buy signal this week.

Dollar index:

The September dollar index lost 21.4 points on volume of 30,432 contracts. Total open interest increased by massive 1,216 contracts, which relative to volume is approximately 55% above average meaning that aggressive new short-sellers were entering the market and driving prices lower (96.300). As this report is being compiled on July 15, the September contract is trading 60.6 points higher and has made a daily high of 97.440, which is a new high for the move and the highest print since 97.450 made on July 7. On July 7, the September dollar index generated a short-term buy signal and though it remains on intermediate-term sell signal for now, this is likely to change within the next day.

Euro:

The September euro advanced 11 pips on volume of 193,023 contracts. Total open interest declined by 570 contracts, which relative to volume is approximately 85% below average. As this report is being compiled on July 15, the September contract is trading 69 pips lower and has made a daily low 1.0938, which takes out yesterday’s print of 1.0974, and is the lowest price since 1.0927 made on July 7. On July 6, the September euro generated a short-term sell signal and is likely to generate an intermediate term sell signal this week.

S&P 500 E mini:

The September S&P 500 E mini advanced 7.50 points on lackluster volume of 959,143 contracts. Total open interest declined by 18,456 contracts, which relative to volume is approximately 20% below average. The total open interest decline in yesterday’s trading is negative, but this has been the pattern since the rally in the E mini began on July 9.

From July 9 through July 14, the September E mini gained 62.75 points, but total open interest has declined by a massive 127,985 contracts and total open interest increased on 1 occasion (July 13) when the September contract gained 25.50 points on volume of 1,335,162 and total open interest increased just 20 contracts.

We are suspicious of the current rally, however on July 15, the September contract will generate an intermediate term buy signal if the low of the day remains above OIA’s key pivot point for July 15 of 2093.50. The E mini will generate a short-term buy signal if the daily low is above 2100.85, and thus far on July 15 the September contract’s low has been 2099.25. We think the best way to trade the E mini is to initiate a long straddle or strangle option position in the December contract. For clients who are subscribers to OIA direct, please call with any question.