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Soybeans:

August soybeans advanced 29.50 cents on volume of 238,975 contracts. Volume was above that of July 8 when the August contract gained 4.75  cents on volume of 212,619 contracts and total open interest declined by 1,679. However, volume was substantially below that of July 7 when the August contract lost 30.25  cents on volume of 292,344 contracts and total open interest declined by 6,954. On July 9, total open interest increased by 5,852 contracts, which relative to volume is average. The July contract lost 694 of open interest and new crop November -1117, which makes the total open interest increase more impressive (bullish).

Volume was disappointing on July 9, especially considering the magnitude of the move and it was substantially below July 7 when soybeans lost nearly the same amount as it gained on July 9. In short, volume should be expanding in the direction of the underlying trend. Volume should have increased on July 9 compared to July 7: instead it was the reverse.

Though total open interest increased by an average amount relative to volume on July 9, it follows a pattern of relatively unimpressive total open interest increases on advances. For example, on June 30 when the August contract advanced 55.00 cents on volume of 503,063 contracts, total open interest increased only 6,379, which was 45% below average. In summary, on two days when the August contract advanced 84.50 cents, total open interest increased just 12,231 contracts. On healthy advance, total open interest should have increased by this number on each day.

This is relevant because as this report is being compiled on July 10 after the release of the USDA report, the August contract is trading 18.75 cents above yesterday’s close and has made a new high for the move of 10.48 1/4, which is the highest print since 10.47 1/4 made on July 2, but below the high for the move of 10.54 3/4 made on July 1. It is crucial the August contract takes out the July 1 print by a substantial margin on heavier than normal volume and that total open interest increases substantially on today’s rally. August soybeans remain on a short and intermediate term buy signal.

Soybean oil:

August soybean oil advanced 68 points on volume of 110,369 contracts. Total open interest increased just 115 contracts, which is minuscule and dramatically below average. The July contract lost 476 of open interest, August -1381, new crop December -2714, which means there was enough open interest increases in the forward months to offset the declines in the three delivery months, but not enough to substantially increase total open interest.

As this report is being compiled after the release of the USDA report, the August contract is trading 36 points above yesterday’s close and has made a high of 32.83. Clients should maintain bearish positions, but stops should be lowered to protect profits. We think the rally in the soybean complex is on its last legs and therefore recommend holding bearish soybean oil positions.

Soybean meal:

August soybean meal advanced $11.30 on volume of 110,431 contracts. Volume was only slightly above that of July 7 when the August contract lost $3.80 on volume of 109,698 contracts and total open interest increased by 874 contracts. Volume traded on July 9 is a definite disappointment when compared to previous sessions and indicates that many potential participants are on the sidelines.

Also, disappointing was the total open interest increase of just 1,539 contracts, which relative to volume is approximately 40% below average. The July contract lost 998 of open interest, August -1015. The disappointing volume and open interest action on July 9 is especially important because the August contract made a new high for the move of 357.80 on July 9 and has been the out performer in the soybean complex. As this report is being compiled on July 10 after the release of the USDA report, the August contract is trading $5.90 higher and has made a new high for the move of 366.40. August soybean meal remains on a short and intermediate term buy signal.

Corn:

September corn advanced 4.25 cents on volume of 438,065 contracts. Volume was above that of July 8 when the September contract gained 1.25 cents on volume of 364,955 contracts, but is substantially below that of July 7 when the September contract lost 3.25 cents on volume of 564,168 contracts and total open interest increased by 9,218.Similar to soybeans, volume increased when prices declined and when prices increased, volume declined. This is not what you want to see on an advance.

On July 9, total open interest increased by 11,071 contracts, which relative to volume is average. The July contract lost 1,602 of open interest, September -3,372, March 2016 -2,175, and there were sufficient open interest increases in the forward months to offset the decline in the three delivery months and increase total open interest to an average number.

As this report is being compiled after the release of the USDA report, the September contract is trading 7.50 cents above yesterday’s close and has made a new high for the move of 4.39 1/4. Corn is the out performer in the grain complex on July 10. Although the market can continue to grind higher, it needs to have more participation as evidenced by increasing volume on advances and higher than average total open interest increases.In the upcoming Weekend Wrap, we will have a better idea of the positioning of managed money and whether sufficient numbers of short sellers have been blown out since the last report.

Chicago wheat:

September Chicago wheat lost 0.50 cents on volume of 110,369 contracts. Total open interest increased by a sizable 4,027 contracts, which relative to volume is approximately 20% above average meaning a battle ensued between buyers and sellers and sellers were able to edge the market slightly lower. The July contract loss 291 of open interest. As this report is being compiled after the release of the USDA report, the September contract is trading 3.25 cents higher and has made a daily high a 5.88 1/4, which takes out the July 9 high of 5.86 1/2, but matches the high of July 8 (5.88 1/4). On the other hand, the September contract has made daily low of 5.68 1/2, which is the lowest print since 5.62 3/4 made on June 29. September Chicago wheat remains on a short and intermediate term buy signal.

Live cattle:

August live cattle lost 52.5 points on heavy volume of 73,356 contracts. Volume was substantial, but declined from July 8 when the August contract lost 2.075 cents on volume of 81,177 contracts and total open interest declined by 6,426. On July 9 total open interest declined by 1,671 contracts, which relative to volume is approximately 10% below average, but the pattern of liquidation on price declines continue, however we are not seeing total open interest increases on declines, which is a positive.

As this report is being compiled on July 10, the August contract is trading 97.5 points below yesterday’s close, and has made a new low for the move of 1.47350, which is the lowest print since 1.46900 made on May 1. Maintain bearish positions recommended in the July 1 report, which was written on July 2 and lower stops to protect profits. On June 26, August live cattle generated a short-term sell signal, but remains on an intermediate term buy signal.

WTI crude oil:

August WTI crude oil advanced $1.13 on volume of 731,363 contracts. Volume was lower than July 8 when the August contract lost 68 cents on volume of 881,855 contracts and total open interest increased by 8,704. Additionally, volume was below that of July 7 when the August contract lost 20 cents on volume of 961,780 contracts and total open interest increased by 2,588. In summary, even though the rally on July 9 was substantially greater than the declines of July 7 and 8, volume was substantially below those two days. This is not what you want to see when prices are advancing.

On July 9, total open interest increased by 10,077 contracts, which relative to volume is approximately 45% below average. However, the August contract lost 33,833 of open interest, which makes the total open interest increase more impressive (bullish). As this report is being compiled on July 10, the August contract is trading 20 cents lower and has made a daily high a 53.89, which takes out yesterday’s high of 53.54 and is the highest print since 55.34 made on July 6. On May 20, WTI generated a short-term sell signal and an intermediate term sell signal on July 3.

Dollar index:

The September dollar index gained 31.6 points on volume of 33,157 contract. Total open interest increased by 126 contracts, which relative to volume is approximately 75% below average. As this report is being compiled on July 10, the September contract is trading 58.3 points lower and has made a daily low of 95.555, which is the lowest print since 95.640 made on July 1. On July 7, the September dollar index generated a short term buy signal, but remains on an intermediate term sell signal.

Euro:

The September euro lost 49 pips on volume of 173,352 contracts. Total open interest declined by 988 contracts, which relative to volume is approximately 70% below average. As this report is being compiled on July 10, the September contract is trading 1.27 cents above yesterday’s close and has made a daily high of 1.1226. It should be noted the high was made during the hours of 4:00-4: 10 AM Pacific daylight time and volume traded in this 10 minute segment was 8,584.

We bring us your attention because the daily high made on July 10 should be considered a major inflection point. If the market is able to break above this, we could see another surge in the advance. However, we do not think this is in the cards and in order for the short term sell signal to reverse, the September contract would have to make a daily low above OIA’s key pivot point for July 10 of 1.1244.

Yen:

The September yen lost 48 pips on volume of 127,393 contracts. Volume declined dramatically from July 8 when the September contract gained 122 pips on volume of 216,037 contracts and total open interest increased by 6,028. On July 9, total open interest declined by 4,834 contracts, which relative to volume is approximately 25% above average meaning liquidation was substantial on the decline. This is healthy open interest action, especially since the September yen is on a short term buy signal and total open interest has been increasing on advances.

As this report is being compiled on July 10, the September contract is trading sharply lower, down 99 pips, or -1.21%. On July 6, the September yen generated a short term buy signal and the pullback just began on July 9. Perhaps there will be one more day of corrective activity before the yen resumes its uptrend.