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The USDA will release its monthly WASDE report on July 10.

Soybeans:

August soybeans advanced 4.75 cents on volume of 212,619 contracts. Volume was the weakest since July 6 when the August contract lost 16.00 cents on volume of 186,563 contracts and total open interest increased by 1,942. On July 8 total open interest declined by 1,679 contracts, which relative to volume is approximately 60% below average, but an open interest decline on yesterday’s price advanced is negative. The July contract lost 1,175 open interest, August -4,078, November 2015 -1,534.

As this report is being compiled on July 9, the August contract is trading sharply higher, up 32.75 cents, or +3.29% while soybean meal is trading +3.43% and soybean oil +2.40%.We pointed out in the July 7 report that the longer it took for soybeans to mount a rally and take out the highs made on July 6 and 7, the likelihood increased that the print made on July 1 was going to be the high for the move.At this juncture, it appears that a test of the July 1 high may be in the offing, but it is extremely important for total open interest to increase in today’s trading. Also, increasing volume in today’s trade would add to the positive tone if total open interest increases.August soybeans remain on a short and intermediate term buy signal.

From the July 7 report:

“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.”

Soybean oil: On July 8, August soybean oil generated an intermediate term sell signal after generating a short term sell signal on June 18.

August soybean oil gained 17 points on volume of 138,241 contracts. Total open interest declined by 4,333 contracts, which relative to volume is approximately 10% above average, meaning that liquidation was heavier than normal on the modest advance. The July contract lost 365 of open interest, August -1,407, new crop December -5,373.

For the past three sessions beginning on July 6, total open interest has declined each day and for the three day time frame has declined by 17,062 contracts while the August contract lost 1.81 cents. Although it is positive that total open interest has not been increasing on the downtrend ( managed money is heavily long), the August contract is now on a short and intermediate term sell signal. After the generation of an intermediate term sell signal, the market has a tendency to rally for a 1-3 day period, before resuming its downtrend.

Maintain bearish positions recommended in the June 23 report and as we said in the July 6 report, lower stops based upon sound money management principles.

Soybean meal:

August soybean meal advanced $1.30 on light volume of 90,648 contracts. Total open interest increased by a massive 5,053 contracts, which relative to volume is approximately 120% above average meaning that a battle ensued between buyers and sellers and buyers were able to the edge the market slightly higher. The July contract lost 468 of open interest. As this report is being compiled on July 9, the August contract is trading $12.60 higher and has made a daily high a 357.40, which is a new high for the move and takes out the July 1 print of 356.20.

It should be noted that although soybean meal is making new highs for the move, soybeans are trading approximately 25 cents from the July 1 high. As we pointed out in yesterday’s report, total open interest had been increasing on price declines and we considered this to be a bearish development. Like soybeans, it will be important for total open interest to increase in today’s trading and should be accompanied by increasing volume.

From the July 7 report:

“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.”

Corn:

September corn lost 1.25 cents on light volume of 364,955 contracts. Volume was slightly below that of July 6 when the September contract lost 2.00 cents on volume of 367,892 contracts and total open interest declined by 4,881. Although volume was light on July 8, the total open interest decline was extremely heavy losing 15,234 contracts, which relative to volume is approximately 40% above average meaning liquidation was extremely heavy on the fractional advance. The July contract lost 1,015 of open interest, September -11,971, new crop December -3,539.Perhaps yesterday’s liquidation occurred due to the Friday USDA report, but we find that heavy liquidation on what was a fairly positive day to be a bit troubling.

As this report is being compiled on July 9, the September contract is trading 6.50 cents higher and has made a new high for the move of 4.33, which takes out the July 2 print of 4.30 3/4, the high for the move. Like soybeans and soybean meal, it will be important for total open interest to increase on this rally and ideally volume should be heavier than normal.

We remain concerned about the situation in China and think that the severe decline that has occurred thus far in equities is a prelude to something much worse. It appears the economy in China is far worse than what is being reported by the American and Beijing press. September corn remains on a short and intermediate term buy signal

From the July 7 report:

“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 7.75 cents on light volume of 109,901 contracts. Volume was the weakest since June 12 when Chicago wheat lost 0.50 cents on volume of 111,192 contracts and total open interest increased by 4,505 contracts.We consider yesterday’s low volume on the price decline as being positive.

On the other hand, total open interest increased by a massive 5,510 contracts, which relative to volume is approximately 100% above average meaning aggressive new short-sellers were entering the market and driving prices lower (5.73), which is the lowest print since 5.72 1/4 made on July 6 and this was the lowest print since 5.62 3/4 made on June 29.

As this report is being compiled on July 9, the September contract is trading 4.25 cents higher and has made a daily high of 5.86 1/2, which is below yesterday’s high of 5.88 1/4. September wheat is the under performer in the grain complex on July 9. September wheat remains on a short and intermediate term buy signal.

Live cattle:

August live cattle lost 2.075 cents on heavy volume of 81,177 contracts.Volume was the strongest since May 29 when 87,637 contracts were traded and the August contract closed at 1.51275. Liquidation was heavy as well on July 8 with total open interest declining by 6,426 contracts, which relative to volume is approximately 210% above average. The August contract lost 11,427 open interest, December 2015 -104.

As this report is being compiled on July 9, the August contract is trading 92.5 points lower and is making new lows for the move. On June 26, August live cattle generated a short-term sell signal and an intermediate term sell signal will be generated if the daily high is below OIA’s key pivot point for July 9 of 1.48615.

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.

WTI crude oil:

August WTI crude oil lost 68 cents on fairly heavy volume of 881,855 contracts.However, volume declined from July 6 and 7 when the August contract lost $2.99 and 20 cents respectively.On July 8, total open interest increased by 8,704 contracts, which relative to volume is approximately 50% below average, however the August contract lost 34,187, which means there were sufficient open interest increases in the forward months to offset the decline in July and increase total open interest.

In summary, market participants  initiated new short positions and were in control yesterday as they drove prices to a low of 50.91, which is above below for the move of 50.58 made on July 7. Remarkably, the open interest increase in yesterday’s trading was the largest during the recent slide in prices. This may indicate that a temporary bottom has been reached because it feels like the Johnny-come-lately’s were getting on board the short side.

As this report is being compiled on July 9, the August contract is trading $1.23 above yesterday’s close and has made a daily high at 53.54, which is slightly above the high of 53.43 made on July 7. On May 20, OIA announced that WTI crude oil generated a short-term sell signal and an intermediate term sell signal on July 3.

Dollar index:

The September dollar index lost 60.4 points on volume of 40,174 contracts. Total open interest declined by 1,375 contracts, which relative to volume is approximately 15% above average meaning liquidation was heavier than normal on yesterday’s decline. This is perfectly healthy for the market, and as this report is being compiled on July 9, the September contract is trading 45.8 points higher on the day. On July 7, the September dollar index generated a short term buy signal, but remains on an intermediate term sell signal.

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.”

Euro:

The September euro gained 85 pips on volume of 216,100 contracts. Total open interest declined by 1,704 contracts, which relative to volume is approximately 55% below average, but an open interest decline on yesterday’s price advance is bearish and confirms the downtrend of the market. As this report is being compiled on July 9, the September contract is trading 65 pips lower after making a daily high of 1.1136, which slightly takes out yesterday’s high of 1.1104.On July 6, the September euro generated a short-term sell signal, but remains on an intermediate term buy signal.

British Pound: On July 8, the September British pound generated a short-term sell signal, but remains on intermediate-term buy signal.

The September British pound lost 89 pips on light volume of 85,903 contract. Total open interest declined by 1,065 contracts, which relative to volume is approximately 45% below average. As this report is being compiled on July 9, the September contract is trading just 4 pips lower after making a daily high of 1.5413, which is below yesterday’s high of 1.5460.

Yen:

The September yen advanced 122 pips on heavy volume of 216,037 contracts. Total open interest increased by a sizable 6,028 contracts, which relative to volume is average, but July 8 was the third day in a row in which open interest increased as prices advanced. This is bad news for short sellers because according to the latest COT report, managed money is short by a ratio of 5.70:1. On July 6, the September yen generated a short-term buy signal and will generate an intermediate term buy signal if the daily low is above OIA’s key pivot point for July 9 of .8284. We think the yen is headed higher