For Bloomberg access:{OIAR<GO>}

Soybeans:

August soybeans lost 8.50 cents on volume of 189,295 contracts. Volume declined from July 14 when the August contract lost 4.00 cents on volume of 193,196 contracts and total open interest increased by 3,675. On July 15, total open interest declined by 2,029 contracts, which relative to volume is approximately 50% below average. The August contract lost 2,346 of open interest, new crop November -1,491.While it is positive that volume shrank on yesterday’s decline and that open interest decreased, all this does is postpone the inevitable wave of selling when prices move lower. Yesterday, the August contract made a low of 10.14 1/4, which is the lowest print since 9.95 3/4 made on July 9.

As this report is being compiled on July 16, the August contract is trading 7.00 cents lower and has made a daily high of 10.38 1/4, which is slightly above yesterday’s high of 10.35. As we have said before, we think soybeans are topping, and that the path of least resistance is lower.August soybeans remain on short and intermediate term buy signals.

Soybean oil:

August soybean oil lost 75 points on volume of 118,493 contracts. Total open interest declined by 4,169 contracts, which relative to volume is approximately 20% above average, meaning that liquidation was heavier than normal. The August contract lost 3,809 of open interest, March 2016 -1,309. Yesterday, the August contract made a low 31.56, which takes out the July 9 low of 31.59, but is above the July 8 print of 31.33. We expect this to be taken out shortly and as this report is being compiled on July 16, the August contract is trading 18 points lower on the day. Maintain bearish positions originally recommended on June 23 and lower stops to protect profits. August soybean oil remains on short and intermediate term sell signals.

Soybean meal:

August soybean meal advanced $5.00 on volume of 118,459 contracts. Volume was the strongest since June 30 when the August contract advanced $17.90 on volume of 192,303 contracts and total open interest increased by 594. On July 15, total open interest increased by 2,211 contracts, which relative to volume is approximately 25% below average. The open interest increases were across the board and the only delivery month showing a decline was the July 2016 contract, which lost 327 of open interest.

The relatively strong volume and open interest increase on yesterday’s price advance is the most positive we have seen in at least several days. As this report is being compiled on July 16, the August contract has made a new high for the move of 372.10,which takes out the previous high of 366.40 made on July 10, but has pulled back dramatically and is now trading unchanged on the day.

The problem with soybean meal and soybeans is that they are not able to close at new highs. The pattern is they make new highs and then sellers enter the markets to push prices lower. In order for the two markets to advance, they must make new closing highs. However, this is not occurring. August soybean meal remains on short and intermediate term buy signals.

Corn:

September corn advanced 1.25 cents on volume of 456,242 contracts. Remarkably, volume increased from July 14 when the September contract lost 12.50 cents on volume of 443,838 contracts and total open interest increased by 3,046.On July 15, total open interest increased by a sizable 8.985 contracts, which relative to volume is approximately 20% below average, and the September contract lost 8,504 of open interest, which makes the total open interest increase somewhat friendly.

Based upon the price and open interest action from July 13 through July 15, we are becoming increasingly concerned that short sellers, who are most likely commercials are in control of the board. For example, from July 13 through July 15 September corn declined by 5.25 cents, but total open interest has increased by a sizable 31,796 contracts. In summary, short selling is not only keeping a lid on prices, it is driving them lower.

In the July 13 report, we expressed our concern when September corn made a new high for the move of 4.42, and total open interest increased by a massive 19,765 contracts, on low volume of 364,013 that Johnny-come-lately’s were entering the market at the top of the trading range. Subsequent action on July 14 and 15 is confirming our analysis of July 13. Below, we are reprinting part of the July 13 report.

From the July 13 report:

“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 4.25 cents on volume of 122,836 contracts. Total open interest increased by 2,585 contracts, which relative to volume is approximately 20% below average. Open interest increases were across the board and the September 2016 contract was the only delivery month which lost open interest (-4).). For the past three sessions beginning on July 13, September Chicago wheat has declined 9.25 while total open interest has increased each day and totals 8,168 contracts, which confirms that short sellers are in control of the wheat market. As this report is being compiled on July 16, the September contract is trading 1.25 cents lower, but has not taken out yesterday’s print of 5.58 1/2. The path of least resistance for Chicago wheat is lower. September Chicago wheat remains on a short and intermediate term buy signal.

Live cattle:

August live cattle lost 12.5 points on light volume of 39,923 contracts. Total open interest increased by 1,170, which relative to volume is approximately 10% above average meaning new short-sellers were entering the market and driving prices fractionally lower. Yesterday is the first total open interest increase we have seen on a price decline since August live cattle generated a short-term sell signal on June 26. The August contract lost 1,492 of open interest, which makes the total open interest increase more impressive (bearish).

As this report is being compiled on July 16, the August contract is trading 60 points lower and has made a daily low of 1.46100, which matches the July 14 low of 1.46100. With new short-sellers entering the market for the first time on July 15, we may have the first indication that prices have reached a temporary bottom.For those of you who initiated bearish positions per our recommendation in the July 1 report, we recommend tightening stops to protect profits and to use the penetration July 14 high of 1.47925 to exit these positions.

Natural gas:

August natural gas advanced 7.8 cents on volume of 344,473 contracts. Volume shrank from July 14 when the August contract lost 2.4 cents on volume of 372,551 contracts and total open interest declined by 3,510.On July 15, total open interest increased by a strong 11,544 contracts, which relative to volume is approximately 25% above average meaning aggressive new buyers were entering the market in large numbers and driving prices higher (2.929), which is below the July 14 print of 2.934. The August contract lost 7,146 of open interest, which makes the total open interest increases more impressive (bullish).

As this report is being compiled on July 16, August natural gas is trading 5.2 cents lower after the release of the EIA storage report, and the August contract has made a high of 2.930, which is below the July 14 print of 2.934. This is a disappointment, and the daily low has been 2.842, which is below OIA’s key pivot point of 2.853 to generate a short-term buy signal on July 16. For a short-term buy signal to be generated, the low of the day must be above the pivot point.

Weekly Natural Gas Storage Report – EIA

Working gas in storage was 2,767 Bcf as of Friday, July 10, 2015, according to EIA estimates. This represents a net increase of 99 Bcf from the previous week. Stocks were 653 Bcf higher than last year at this time and 73 Bcf above the 5-year average of 2,694 Bcf. In the East Region, stocks were 65 Bcf below the 5-year average following net injections of 57 Bcf. Stocks in the Producing Region were 115 Bcf above the 5-year average of 967 Bcf after a net injection of 32 Bcf. Stocks in the West Region were 24 Bcf above the 5-year average after a net addition of 10 Bcf. At 2,767 Bcf, total working gas is within the 5-year historical range.

Dollar index: On July 16, the cash dollar index will generate an intermediate term buy signal after the September dollar index generated a short term buy signal on July 7.

The September dollar index advanced 49.5 points on volume of 42,756 contracts. Total open interest increased by massive 2,406 contracts, which relative to volume is approximately 120% above average meaning that aggressive new buyers were entering the market in large numbers and driving prices to a new high for the move (97.440). As this report is being compiled on July 16, the September dollar index is trading sharply higher, up 40.1 points and has made in new high for the move of 97.915, which is the highest print since 98.005 made on June 2.

From the July 7 report:

“We think the dollar index is headed higher, and likely will see another pullback tomorrow and possibly the day after, but this should be the extent of it. We are bullish on the dollar index and recommend that clients consider either outright long positions in futures, or long September option contracts. Wait for at least one more day before considering positions. For those of you who are subscribers to OIA direct, please call with any question.”

Euro: On July 16, the September euro will generate an intermediate term sell signal after generating a short term sell signal on July 6.

The September euro lost 61 pips on volume of 190,450 contracts. Total open interest increased by 3,403 contracts, which relative to volume is approximately 25% below average, but yesterday’s open interest increase on the price decline is bearish. This follows the decline on July 13 when the September contract lost 1.31 cents on volume of 254,672 contracts and total open interest increased by 6,250. As his report is being compiled on July 15, the September contract is trading 60 pips lower and has made a daily low of 1.0864, which is the lowest print since 1.0837 made on May 27.

Yen: The September yen will generate a short-term sell signal on July 16, which reverses the short-term buy signal of July 6. The September contract remains on an intermediate term sell signal.

The September yen lost 24 pips on volume of 87,309 contracts. Total open interest increased by 2,175 contracts, which relative to volume is average. On July 13, the September contract lost 40 pips on volume of 114,363 contracts and total open interest increased by 3,628. In short, there is a pattern of open interest increases as prices move down to the low end of their recent trading range. Ever since the pullback exceeded three days from July 9, we have been suspicious of the short-term buy signal generated on July 6.

From the July 13 report:

“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.”

S&P 500 E mini: On July 15, the September S&P 500 E mini generated an intermediate term buy signal and will generate a short-term buy signal on July 16 if the daily low remains above 2101.20.

The September S&P 500 E mini gained 2.25 points on volume of 1,148,938 contracts. Total open interest declined by 16,367 contracts, which relative to volume is approximately 40% below average, but remarkably this is the fourth decline of total open interest on a price advance since the market rally began on July 9. We strongly recommend the initiation of long straddle or strangle option positions in the December S&P 500 E mini. For subscribers to OIA direct, please call with any question.