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Soybeans:

September soybeans advanced 3.00 cents on light volume of 188,119 contracts. Volume was the weakest since July 21 when soybeans advanced 11.00 cents on volume of 140,026 contracts and total open interest increased by 6,574. On July 29, total open interest increased by 3,465 contracts, which relative to volume is approximately 25% below average, however a total open interest increase on yesterday’s modest advance is positive. The August contract lost 5,569 of open interest, January 2016 -946, which means there were sufficient open interest increases in the forward months to offset the decline in both months and increase total open interest.

As this report is being compiled on July 30, the September contract is trading 7.75 cents above yesterday’s close and has made a daily high 9.70 1/2, which is above yesterday’s print of 9.66. On July 28, August and September soybeans generated short-term sell signals, and as is usually the case, the market tends to have a counter trend rally, which lasts from 1-3 days. July 30 is the second day of the rally, if the day of the buy signal is not counted. On July 28, soybeans advanced 14.75 cents.

Unless there is major news or weather turns negative, we think this rally will peter out. The short-term sell signal will be reversed if the daily low is above OIA’s key pivot point for July 30 of 9.94 1/2.We think this is unlikely at this juncture, however, we recommend against entering bearish positions. August is the key month for soybean development and there is no point in gambling on perfect weather. One final point, it appears that the dollar index has resumed its uptrend, and this will continue to weigh on soybeans and the grain complex in general. The dollar index is on a short and intermediate term buy signal.

From the July 28 report:

“Today is the first day of the counter trend rally after August and September soybeans generated a short-term sell signal. Conceivably, another day or two of advances may occur, but we do not think the market has the momentum for a substantial move higher unless there is a weather scare.”

Soybean meal:

September soybean meal advanced $2.00 on volume of 88,455 contracts. Total open interest declined by 3,473 contracts, which relative to volume is approximately 30% above average meaning that liquidation was fairly substantial on the modest advance. The August contract lost 4,543 of open interest and the December and January 2016 contracts lost a total of 825.

As this report is being compiled on July 30, the September contract is trading $4.10 higher and has made a daily high of 344.40, which takes out yesterday’s print of 342.20. Remarkably, soybean meal continues to hold up well and as yet has not generated a short or intermediate term sell signal. Meal will provide support to soybeans, but we question how much longer soybean meal can lead the parade.

Corn:

September corn lost 7.25 cents on surprisingly light volume of 293,857 contracts. Volume was below that of July 28 when the September contract gained 2.00 cents on volume of 315,375 contracts and total open interest declined by 16,006. Volume was above that of July 24 when the September contract lost 10.75  cents on volume of 274,709 contracts and total open interest declined by 9,946.

On July 29, total open interest increased by 2,015 contracts, which relative to volume is approximately 65% below average, however a total open interest increase on yesterday’s price decline is clearly bearish. The September contract lost 5,999 of open interest and there were open interest increases in the December 2015 through December 2018 contracts with the exception of May 2017, which had an unchanged open interest number.

The action in yesterday’s trading is bearish for two important reasons: First, September corn experienced a fairly significant decline into new low territory, and total open interest increased. This is problematic because it indicates that speculators are refusing to liquidate as prices move lower. This is an ongoing story, and it appears prices must move considerably lower to flush out the massive number of speculative longs.

Yesterday, September corn reached its lowest price since June 25. To place this in context consider that the COT report of June 23 showed managed money short by a ratio of 1.58:1 and by June 30 became net long for the first time when the ratio printed 1.19:1. The COT report of July 21 showed managed money long by a ratio of 4.98:1, a massive increase from June 30.

In summary, managed money has liquidated very little. This conclusion is based upon current prices and comparing them to the net long position of managed money in the COT reports of June 23 and June 30 when prices were nearly at the same level. This means there is a massive supply of distressed would be sellers who refuse to liquidate at the lower end of the trading range. As a result, any rally is going to be met by selling, which should keep rallies small and of short duration.

The second concern is low volume on substantial price declines. This confirms our thesis about speculative sellers refusing to liquidate. Although volume increased substantially on July 27 when the September contract lost 19.50 cents on volume of 520,649 contracts, total open interest declined only 3,841, which again confirms speculative intransigence. In summary, on a day when total open interest should have declined massively it experienced a minor decline.

On July 27, September and December corn generated short-term sell signals and since then the market has had two unimpressive rally days: the first on July 28 (+2.00) and the second on July 30. The September contract is just 19 cents from the contract low of 3.52 made on the June 16. It appears inevitable that new contract lows are not far off.

As this report is being compiled on July 30 the September contract is trading 3.75 cents higher, but has made a new low for the move of 3.65 3/4, just 13 3/4 cents from the contract low of 3.52. Although, we would like to see a reasonably strong rally in order to recommend bearish positions, we do not think this is in the cards. Additionally, as we pointed out at the top of the report, the dollar index has resumed its uptrend and will pressure prices along with the very week wheat market.