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Soybeans:

August soybeans lost 6.00 cents on volume of 168,488 contracts. Volume was below that of July 15 when the August contract lost 8.50 cents on volume of 189,295 contracts and total open interest declined by 2,029.Additionally, volume was the lowest since July 13 when August soybeans gained 5.50 cents on volume of 140,581 contracts and total open interest increased by 772.

On July 16, total open interest declined by 1,545 contracts, which relative to volume is approximately 50% below average. The August contract lost 1,782 of open interest, new crop November -2,697. From July 13 through July 16, August soybeans have lost 18.50 cents while total open interest increased by 101 contracts. This is a neutral reading and indicates that liquidation and new short selling is light.

As this report is being compiled on July 17, the August contract is trading 1.25 cents lower is made a new low for the move of 10.07 1/2, which is the lowest print since in 9.95 3/4 made on July 9. With the dollar index on an upward trajectory, and the seasonal tendency for soybeans to top in July, we think the market will eventually succumb to lower prices. Thus far, market participants are not panicking by pushing prices lower, but this could change next week. August soybeans remain on short and intermediate term sell signals.

Soybean oil:

August soybean oil lost 19 points on volume of 113,171 contracts. Total open interest increased by 875 contracts, which relative to volume is approximately 60% below average, but the August contract lost 4,118 of open interest, which means there were sufficient open interest increases in the forward months to offset this decline and increase total open interest.

The total open interest increase on July 16 represents new short-sellers who are entering the market at the low end of the trading range.On July 14, the August contract lost 34 points and by 550. This increases the likelihood of a brief bounce to run out the new short-sellers, but we think soybean oil is headed lower because the soybean complex is likely to experience pressure in the coming weeks. Maintain bearish positions recommended on June 23, but lower stops to protect profits. August soybean oil remains on short and intermediate term sell signals.

Soybean meal:

August soybean meal advanced $1.40 on volume of 117,106 contracts. Total open interest declined by 1,270 contracts, which relative to volume is approximately 50% below average. The August contract lost 1,894 of open interest, October and December 2015 lost a total of 1,440.

Yesterday, August soybean meal made a new high for the move of 372.10, and sold off to close fractionally higher. As this report is being compiled on July 17, the August contract is trading 2.40 lower on the day. As we said in yesterday’s report, neither soybean meal nor soybeans have the ability to make new closing highs, and this is symptomatic of aggressive short-sellers who enter the market at the high end of the trading range and pound prices down. August soybean meal remains on short and intermediate term buy signals.

Corn:

September corn gained 0.50 cents on volume of 404,948 contracts. Volume was the lowest since July 13 when the September contract advanced 6.00 since on volume of 364,013 contracts and total open interest increased by 19,765. On July 16, total open interest increased by a sizable 11,779 contracts, which relative to volume is approximately 10% above average meaning that a battle ensued between buyers and sellers for dominance and buyers were able to edge the market just fractionally higher.

In yesterday’s report, we discussed our concern about the massive build of open interest during the three day time frame in which prices were declining. If we add the open interest increase from July 16 to the total mentioned in the July 15 report of 31,796, total open interest has increased by 43,575 during July 13-16 while September corn has declined 4.75 cents in this time frame. This is bearish. In summary, total open interest increases are pushing prices lower, not higher. Short sellers are in control and we suspect that the bulk of these are commercials.

Additionally, September Chicago wheat is very close to generating a short-term sell signal, and this will apply pressure to corn, in addition to the rising dollar index.  In this week’s COT report, which will be released this afternoon we will have a much better idea to what extent managed money has increased their net long position, if at all and will report this on Sunday.

From the July 15 report:

“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.”

Chicago wheat:

September Chicago wheat lost 4.50 cents on volume of 113,171 contracts. Total open interest declined by 4,213 contracts, which relative to volume is approximately 20% above average, meaning that liquidation was fairly heavy on the modest decline.The September contract lost 6,076 of open interest and the May 2016 and July 2016 contract lost a total of 368. As this report is being compiled on July 17, the September contract is trading 10.75 cents lower and has made a daily low of 5.46, which is the lowest print since 5.36 made on June 26.

September Chicago wheat will generate a short-term sell signal if the daily high is below OIA’s key pivot point for July 17 of 5.50 7/8. If the September contract closes below the pivot point on July 17, the chances increase that a short-term sell signal will be generated on Monday, July 20.

Live cattle:

August live cattle lost 52.5 points on very light volume of 33,651 contracts. Total open interest increased just 72 contracts. However, the August contract lost 1,681 of open interest and December -97, which means there were sufficient open interest increases in the forward months to offset the decline in the two months and increase total open interest fractionally. As this report is being compiled on July 17, the August contract has made a new low for the move of 1.45525, which is the lowest print since 1.44825 made on April 23.Based upon our evaluation of the August chart, there is no support until the 1.44000 level.

In the July 1 report, we recommended the initiation of bearish positions and advise exiting these upon penetration of the July 14 high of 1.47925.

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

The September dollar index advanced 52.7 points on healthy volume of 40,393 contracts. Total open interest increased by a massive 2,181 contracts, which relative to volume is approximately 110% above average meaning aggressive new buyers were entering the market in large numbers and driving prices to a new high for the move (97.915). As this report is being compiled on July 17, the September contract is trading 18.4 points higher and has made a new high the move of 98.045.

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

The September euro lost 74 pips on volume of 228,204 contract. Total open interest declined just 422 contracts, which is dramatically below average. As this report is being compiled on July 17, the September contract is trading 28 pips lower and has made a new low for the move of 1.0849.

Yen: On July 16, the September yen generated a short-term sell signal, which reverses the short term buy signal at July 6. The September yen remains on an intermediate term sell signal.

The September yen lost 28 pips on volume of 74,262 contracts. Total open interest increased by 190 contracts, which relative to volume is approximately 85% below average, but this is the third total open interest increase in a row accompanying lower prices, indicating that new short-sellers are piling into the yen. As this report is being compiled on July 17, the September contract is trading 3 pips above yesterday’s close.

S&P 500 E mini: On July 16, the September S&P 500 E mini generated a short-term buy signal after generating an intermediate term buy signal on July 15.

The September S&P 500 E mini gained 12.75 points on volume of 1,110,226 contracts. Total open interest increased by 25,407 contracts, which relative to volume is approximately 10% below average, but this is the first major open interest increase during the course of the rally, which began on July 9.

As this report is being compiled on July 17, the September contract is trading 1.75 points lower even though the NASDAQ 100 is trading 37.75 points higher on the Google earnings announcement. Additionally, the September contract has made a high of 2119.25, which is only slightly above yesterday’s high of 2118.50.Although, the market can continue to advance, we remain suspicious of the rally and recommend the initiation of long option straddles or strangles in the December S&P 500 E mini contract. For subscribers of OIA Direct, please call with any question.