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Soybeans:

August soybeans lost 30.25 cents on heavy volume of 292,344 contracts. Volume was the strongest since June 30 when the August contract gained 55.00 cents on volume of 503,063 contracts and total open interest increased by 6,379. On July 7, total open interest declined by 6,954 contracts, which relative to volume is approximately 10% below average.

It is healthy that open interest declined along with prices. Liquidation occurred in the front month with July losing 1,144 of open interest, August -3,774, and new crop November -5,319. Yesterday, the August contract made a low of 9.89 1/4, and this has been taken out slightly with a low of 9.87 1/4 on July 8. As this report is being compiled on July 8, the August contract is trading 10.25 cents above yesterday’s close and has made a daily high at 10.08, which is below yesterday’s high of 10.25 3/4.

The longer it takes for soybeans to mount a rally to take out the highs of July 6 and 7 (10.32 and 10.25 3/4 respectively), the likelihood increases that the high for the move of 10.54 3/4 made on July 1 is going to be the high water mark for the August contract. Keep in mind that on the previous day (June 30) the high was 10.51 1/4, which means on July 1, the August contract was only able to make a high of 3 1/2  cents above the previous day’s high. This indicates a lack of follow-through on the strong move of June 30.

Of course if there is a weather scare all bets are off. On the other hand, it is likely that soybean oil will generate an intermediate term sell signal on July 8 after generating a short-term sell signal on June 18, which means that one of the products will no longer be supporting higher bean prices. August soybeans remain on a short and intermediate term buy signal.

Soybean oil:

August soybean oil lost 1.22 cents on heavy volume of 192,096 contracts. Volume exceeded that of June 30 when the August contract gained 54 points on volume of 175,369 contracts and total open interest increased by 1,128.Additionally, volume was the highest since June 15 when the August contract lost 45 points on volume of 223,015 contracts and total open interest declined by 1,401.

On July 7, total open interest declined by a hefty 6,277 contracts, which relative to volume is approximately 15% above average meaning liquidation was heavier than normal on the large decline. The July contract lost 236 of open interest, August -3348, new crop December -5017. As this report is being compiled on July 8, the August contract is trading 48 points higher on low-volume and has made a daily high of 32.10, which is below OIA’s key pivot point of 32.43 for the generation of an intermediate term sell signal. If the daily high remains below the pivot point, an intermediate term sell signal will be generated. Maintain bearish positions recommended in the June 23 report and lower stops based upon sound money management principles.

Soybean meal:

August soybean meal lost $3.80 on volume of 109,698 contracts. Total open interest increased by 874 contracts, which relative to volume is approximately 60% below average, however, an open interest increase on yesterday’s decline is negative. The July contract lost 963 of open interest, August -912, which makes the total open interest increase more impressive (bearish). We are concerned that soybean meal prices have declined for three days in a row and open interest has increased on each day.

From July 2 through July 7 the August contract has lost $9.70 while total open interest increased by 4,001 contracts. Since soybean meal has been the out performer and managed money is net long, we are concerned that the open interest increases are a harbinger of more negative price action going forward. August soybean meal remains on a short and intermediate term buy signal.

Corn:

September corn lost 3.25 cents on relatively heavy volume of 564,168 contracts. Volume was the strongest since July 1 when the September contract gained 0.50 cents on volume of 667,830 contracts and total open interest declined by 2,047. On July 7, total open interest increased by 9,218, which relative to volume is approximately 35% less than average, but an open interest increase on yesterday’s price decline is negative. The July contract lost 2,713 open interest and the new crop December contract lost 1,561, which makes the total open interest increase more impressive (bearish). July 7 with the first day since before June 30 that corn has displayed distinctly negative open interest action relative to yesterday’s price decline.

As this report is being compiled on July 8, the September contract is trading 2.25 cents above yesterday’s close and has made a daily low of 4.18 1/2, which is above the lows of July 6 (4.15) and July 6 (4.17). We are not ruling out another run at the high of the move of 4.30 3/4 and possibly taking this out.

One of our concerns for all agricultural commodities is the chaos in the Chinese stock market which in our view will only get worse and a stronger US dollar. September corn remains on a short and intermediate term buy signal.

Chicago wheat:

September Chicago wheat lost 10.25 cents on volume of 142,682 contracts. Total open interest increased by 2,993 contracts, which relative to volume is approximately 20% below average. The July contract lost 368 of open interest, September -778, which makes the total open interest increase more impressive (bearish). Similar to corn, the open interest action on July 7 was the most negative since before June 30. As with corn, there remains a hefty net short position held by managed money and this class of speculator could help drive prices higher. However, with chaos in Chinese markets and the possibility of a melt down in global markets, we think wheat will likely struggle to make any headway to the upside. September wheat remains on a short and intermediate term buy signal.

Live cattle:

August live cattle gained 57.5 points on volume of 41,043 contracts. Total open interest declined by a hefty 1,629 contracts, which relative to volume is approximately 30% above average meaning liquidation was substantial on the advance. The August contract lost 3,998 of open interest and there were insufficient open interest increases in the forward months to offset the decline in August, which contains the majority of open interest for all contracts. The action yesterday was very negative, and confirms that market participants are losing interest in the long side of live cattle.

As this report is being compiled on July 8, the August contract is trading 2.25 cents lower and has made a daily low of 1.48550, which is the lowest print since 1.48100 made on July 1. Clients that took our advice per the July 1 report, which was written on July 2 should maintain bearish positions and lower stops based upon sound money management.

From the July 1 report:

“On June 26, August live cattle generated a short-term sell signal, and for this to reverse, the August contract must make a daily low above two of OIA’s key pivot points of 1.51640 and 1.51935.”

“We do not think this is likely and think live cattle will soon resume its down trend. Clients should be looking to initiate bearish positions, and could use today’s high (1.51975) or more preferably the June 22 high of 1.52425 as exit points for these.”

WTI crude oil:

August WTI crude oil lost 20 cents on heavy volume of 961,780 contracts. However, volume declined from July 6 when the August contract lost $2.99 on volume of 998,494 contracts and total open interest increased by 5,991. On July 7, total open interest increased only 2,588 contracts. Yesterday, the August contract made a new low for the move of 50.58, which is the lowest print 50.12 made on March 23.

Remarkably, though the market has fallen precipitously during the past couple of days, open interest has barely increased, which definitely indicates a reluctance on the part of potential market participants to initiate new short and long positions. As this report is being compiled on July 8 after the release of EIA a report, the August contract is trading $1.19 below yesterday’s close and has made a daily low of 50.91. On May 20, WTI generated a short-term sell signal and an intermediate term sell signal on July 3.

Gasoline: On July 7, August gasoline generated a short-term sell signal, but remains on intermediate-term buy signal.

August gasoline lost 2.57 cents on heavy volume of 223,218 contracts. Total open interest declined just 671 contracts, which relative to volume is approximately 85% below average. The August contract lost 3,846 of open interest. As this report is being compiled on July 8, the August contract is trading 4.30 cents higher on the day, which is typical counter trend trading behavior after the generation of a short-term sell signal.

Dollar index: On July 7, the September dollar index generated a short term buy signal, but remains on an intermediate term sell signal.

The September dollar index gained 47.1 points on volume the 50,970 contracts. Total open interest exploded higher by 4,610 contracts, which relative to volume is approximately 250% above average meaning aggressive new buyers were entering the market and driving prices to a new high for the move (97.450). As this report is being compiled on July 8, the September contract is trading 50.6 points lower, which is typical counter trend trading behavior after the generation of a short-term buy signal.

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:

The September euro lost 72 pips on volume of 275,826 contracts. Total open interest increased by 6,472 contracts, which relative to volume is approximately 10% below average, but an open interest increase on yesterday’s decline is bearish. On July 6, the September contract generated a short-term sell signal, and the typical counter trend rally has just begun on July 8, and may last for another day or two, but we think this will be the extent of it.

British pound: The September British pound will generate a short-term sell signal on July 8.

The September British pound lost 1.60 cents on surprisingly light volume of 111,805 contracts.Total open interest declined by 3,433 contracts, which relative to volume is approximately 10% above average, meaning that liquidation was somewhat heavier than normal, but actually was relatively light considering the magnitude of yesterday’s move. As this report is being compiled on July 8, the September contract is trading 1.05 cents lower on the day.