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Soybeans:

August soybeans advanced 2.00 cents on heavy volume of 191,160 contracts. Volume was the strongest since July 14 when the August contract lost 4.00 cents on volume of 193,196 contracts and total open interest increased by 3,675. Remarkably, volume was substantially above that of July 21 when the August contract gained 11.00 cents on very low volume of 140,026 contracts and total open interest increased by 6,574.

On July 22, total open interest declined by 857 contracts, which relative to volume is approximately 75% below average, however, and the open interest decline on yesterday’s advance is clearly negative. The August contract lost 5,263 of open interest and there was insufficient open interest increases in the forward months to offset the decline in August.

Open interest increased substantially on July 21, but total open interest declined yesterday as soybeans moved to the highest level since July 16 (10.38 1/4) is a disappointment, and confirms the rally on July 21 was a typical intermittent advance that occurs in any market. That total open interest did not increase yesterday also confirms the lack of new buyers willing to make new commitments at higher prices.

As this report is being compiled on July 23, the August contract is trading 11.75  cents lower after making a daily high at 10.29, which takes out yesterday’s high of 10.271/2. August soybeans remain on a short and intermediate term buy signal, and for a short term sell signal to occur, the high of the day must be below OIA’s key pivot point for July 23 of 9.85 3/4.

Soybean oil:

August soybean oil lost 58 points on volume of 108,014 contracts. Total open interest increased by 1,639 contracts, which relative to volume is approximately 40% below average, however, an open interest increase on yesterday’s price decline is bearish. The August contract lost 1,690 of open interest, October 2015 -280, May 2016 -727, which makes the total open interest increase more impressive (bearish).

As this report is being compiled on July 23, the August contract is trading 5 points above yesterday’s close and has made a daily low 31.14, which is about yesterday’s low of 31.08. Maintain bearish positions originally recommended on June 23 and lower stops to protect profits. August soybean oil remains on a short and intermediate term sell signal.

Soybean meal:

August soybean meal advanced $3.60 on volume of 110,590 contracts. Volume increased dramatically from July 21 when the August contract gained 3.90 on volume of 68,982 contracts and total open interest increased by 3,739. Additionally, volume was the strongest since July 16 when the August contract gained 1.40 on volume of 117,106 contracts and total open interest declined by 1,270.

On July 22, total open interest increased by 945 contracts, which relative to volume is approximately 55% below average. The August contract lost 2,928 of open interest, October 2015 -87, which makes the total open interest increase more impressive (bullish). That total open interest tapered off dramatically from the day before indicates a reluctance on the part of new buyers to make commitments at higher prices.

As this report is being compiled on July 23, the August contract is trading 6.60 lower and has made a daily low 355.20, which is the lowest print since 354.40 made on July 20. August soybean meal remains on a short and intermediate term buy signal.

Corn:

September corn lost 3.75 cents on low volume of 276,918 contacts. Volume was below that of July 21 when the September contract gained 1.50 cents on volume of 288,361 contracts and total open interest declined by 3,833. Additionally, volume was the lowest since June 4 when 250,969 contracts were traded and the September contract closed at 3.70 1/4.

On July 22, total open interest increased by 1,770 contracts, which relative to volume is approximately 65% below average, however, an open interest increase on yesterday’s price decline is bearish. The low volume on yesterday’s decline when prices moved to a new low for the move of 3.99 3/4 is troubling. This, combined with fairly consistent increases of open interest on price declines indicates the board is being controlled by short sellers.

This confirms our thoughts expressed in the July 20 and 21 reports that liquidation is light and with prices continuing to decline, it is only a matter of time before the sizable net long position of speculators is to dramatically reduced. Additionally, the September contract is getting close to generating a short-term sell signal. This will occur if the daily high is below OIA’s key pivot point for July 23 of 3.96 3/4.

September corn remains on a short and intermediate term buy signal. We expect a rally because the market is oversold, but it is likely to be temporary bounce. As this report is being compiled on July 23, the September contract is trading 3.00 cents lower and has made a new low for the move of 3.98 1/2 even though the dollar index is trading sharply lower.

From the July 21 report:

“The decline from the July 14 high has been characterized by substantial open interest increases and undoubtedly there are a fair number of speculative longs showing losses. The question is when do they decide to liquidate.”

From the July 20 report:

“As mentioned in the July 17 report, we are concerned about the low volume and the substantial long position held by managed money is relatively intact. The action yesterday confirms this and liquidation has been rather minor since the September contract topped on July 14 at 4.43 1/4. In summary, there is plenty of fuel to fund a continued downside move.”

Chicago wheat:

September Chicago wheat lost 8.00 cents on relatively strong volume of 125,877 contracts. Volume increased slightly from July 21 when the September contract lost 8.00 cents on volume of 121,588 contracts and total open interest increased by 2,468. On July 22, total open interest increased again, this time by 1,600 contracts, which relative to volume is approximately 45% below average, however an total open interest increase on yesterday’s price decline is bearish. The September contract lost 1,314 of open interest, which makes the total open interest increase more impressive (bearish).

On July 21, September Chicago wheat generated a short-term sell signal, which means the market should have a counter trend rally lasting 1-3 days and this is the opportunity to initiate bearish positions. Do not chase this market lower. Wait for the rally. As this report is being compiled on July 23, the September contract is trading 2.00 cents above yesterday’s close and has made a daily high of 5.27, which is the highest print since 5.37 3/4 made on July 21.

From the July 21 report:

The decline in Chicago wheat has been characterized by open interest increases, and there remains a hefty net long position held by managed money. This class of speculator will continue to pressure the market when they are forced to liquidate.

Live cattle: OIA recommends liquidation of bearish positions originally recommended in the July 1 report. 

This will be our last report on live cattle until we announce a signal change or see a trading opportunity.

August live cattle lost 65 points on volume of 47,891 contracts. Volume exceeded that of July 21 when the August contract lost 1.60 cents on volume of 45,760 contracts and total open interest increased by 2,742.On July 22, total open interest increased again, this time by 3,117 contracts, which relative to volume is approximately 160% above average meaning aggressive new short-sellers were entering the market in very heavy numbers and driving prices to a new low of 1.44175.

This was the second day in a row in which total open interest increased by a substantial amount, especially relative to volume and confirms that Johnny-come-lately’s are entering the market in large numbers. We stated in yesterday’s report that this increases the likelihood of a strong counter trend rally. 

As this report is being compiled on July 23, the August contract is trading 1.025 cents lower and has made a new low for the move of 1.43175, which is the lowest print since 1.43150 made on March 18.

From the July 21 report:

“As a consequence, we recommend taking profits on bearish positions either today or by tomorrow at the latest. The live cattle trade recommended in the July 1 report has been lucrative and we see no reason to squeeze the last dime out of it.”

Lean hogs: On July 22, August lean hogs generated a short term buy signal, but remain on an intermediate term sell signal. October hogs did not generate a short-term buy signal on July 22.

August lean hogs advanced 2.65 cents on heavy volume of 60,040 contracts. Volume was the strongest since July 9 when 63,819 contracts were traded and the August contract closed at 73.275. On July 22, total open interest increased by massive 3,189 contracts, which relative to volume is approximately 105% above average meaning that aggressive new buyers were entering the market in very large numbers and driving prices to a new high for the move (78.775), which is the highest print since 79.450 made on June 11.

As this report is being compiled on July 23, the August contract has made a high of 78.500, below the high made on July 22 and is trading 12.5 points lower on the day. Now that August lean hogs are on a short term buy signal, the market should have a pullback lasting 1-3 days before resuming its uptrend. The fundamentals are not favorable and we see this rally as temporary, which is underscored by the fact that the October contract was unable to generate a short-term buy signal yesterday.