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Soybeans:

November soybeans lost 25.50 cents on volume of 169,105 contracts. Volume was the highest since July 29 when November soybeans lost 12.75 on volume of 174,544 contracts and total open interest declined by 11,645 contracts. On August 1, total open interest increased by a massive 12,994 contracts, which relative to volume is approximately 210% above average meaning that an extraordinarily large number of new short sellers were entering the market and driving prices near the contract low of 10.55. The August contract accounted for loss of 2,397 of open interest and the September 2014 through September 2015 contracts all gained open interest. In summary, there was short selling him contracts across the board. We examined our records for July and June and could not find a single day when open interest increased by nearly the amount on August 1 when soybean prices declined. The huge spike in open interest on Friday’s decline likely signals a temporary bottom.

As this report is being compiled on August 4, November soybeans are trading 17.25 cents higher and have made a daily high of 10.81, which is the highest print since 10.87 1/2 made on July 31. In the early evening session on August 3, November soybeans get to a new contract low at 10.54, and this low held throughout the rest of the evening and day session. It appears likely that November beans have made an interim low, and a rally has been overdue. As mentioned in the August 3 Weekend Wrap, it will take a weather event (hot dry temperatures) to propel soybeans significantly higher. Stand aside.

Corn:

September corn lost 4.50 cents on volume of 204,632 contracts. Volume was the highest since July 30 when September corn advanced 0.25 cents on volume of 221,083 contracts and total open interest declined by 4119 contracts. On August 1, total open interest declined by 5,963 contracts, which relative to volume is approximately 20% above average meaning that greater numbers than usual were liquidating as September corn made a new contract low of $3.51 1/2. The September contract lost 13,933 of open interest. As this report is being compiled on August 4, September corn is trading 2.75 higher after making a daily high of 3.61 1/4, which is the highest print since 3.61 1/2 made on July 31. Stand aside.

Chicago wheat:

September Chicago wheat advanced 4.00 cents on heavy volume of 119,885 contracts.Volume was the highest since July 17 when September Chicago wheat advanced 12.75 cents on volume of 140,124 contracts and total open interest declined by 1,606 contracts. On August 1, total open interest declined by 3,852 contracts, which relative to volume is approximately 25% above average, meaning that market participants were liquidating at an unusually higher rate as prices advanced. The September contract accounted for loss of 5,712 of open interest.As this report is being compiled on August 4, September Chicago wheat is trading 12.00 cents higher and has made a new high for the move at 5.53 1/4, which is the highest print since 5.55 3/4 made on July 18. Remarkably, September Chicago wheat is getting close to generating a short-term buy signal. For this to occur , the low for the day must be above OIA’s key pivot point of 5.53 1/2. Stand aside.

Kansas City wheat:

September Kansas City wheat advanced 7.00 cents on volume of 27,198 contracts. Volume fell from July 31 when September KC wheat advanced 8.75 on volume of 28,677 contracts and total open interest increased by 1,791 contracts. On August 1, total open interest increased again, this time by 1,194 contracts, which relative to volume is approximately 70% above average meaning that unusually large numbers of new longs were entering KC wheat and driving prices higher. For the past 3 trading sessions beginning on July 30, prices of KC wheat have advanced each day along with open interest. For example, from July 30 through August 1 September KC wheat has advanced 21.25 cents while total open interest has increased by 4,028 contracts. This is very bullish open interest action relative to the price advance.

As this report is being compiled on August 4, September KC wheat is trading 9.75 cents higher and has made a daily high of 6.48 3/4, which is the highest print since 6.53 3/4 made on July 18. Interestingly, September Chicago wheat is closer to generating a short-term buy signal band is KC wheat. The reason for this is during the current quarter, Chicago wheat has declined 7.49% while KC wheat declined 9.64%. For the buy signal to occur, the low of the day must be above OIA’s key pivot point of 6.56 3/4. Stand aside.

Live cattle:

October live cattle lost 1.325 cents on volume of 60,953 contracts. Total open interest declined by a massive 19,771 contracts, which relative to volume is approximately an astounding 960% above average. Accounting for the massive total decline of open interest was the August contract, which lost 21,856 of open interest. As this report is being compiled on August 4, October cattle is trading 82.5 points higher after making a low of 1.54950, which is above Friday’s low of 1.54425. Stand aside.

From the August 3 Weekend Wrap:

“We expect the net long position of manage money will decline in next week’s COT report. This sets up a very healthy market condition for an eventual test of the all-time highs. In the meantime, October cattle could decline to its 50 day moving average of 1.51000 and keep its uptrend intact. Likely, a short-term sell signal would be generated if this were to occur. However, the bull move in cattle is by no means over in our view.”

WTI crude oil:

September WTI crude oil lost 29 cents on volume of 576,815 contracts. Volume shrank dramatically from July 31 when September WTI lost $2.10 on volume of 715,067 contracts and total open interest declined by 19,981 contracts. On August 1, total open interest declined by 8,017 contracts, which relative to volume is approximately 40% less than average. The September contract accounted for loss of 11,356 of open interest. As this report is being compiled on August 4, September WTI is trading 13 cents higher on the day and has not taken out Friday’s low but has taken out Friday’s high of 98.10.

September WTI crude oil is massively oversold relative to its 20 day moving average of $101.33 and the 50 day moving average of 102.58, and a decent size rally should be expected. Additionally, the September 2014-December 2014 spread still shows September selling at a $2.19 premium to December as of Friday’s close. This has declined from the recent high of 3.17 on July 23 when September crude oil closed at 103.12. This makes it difficult to get overly bearish at current levels with relatively strong backwardation priced into the term structure of the market. In the report of July 21, OIA recommended the initiation of short calls, and this trade has worked out well. Continue to hold the position.

Natural gas:

September natural gas lost 4.3 cents on volume of 204,514 contracts. Total open interest declined by 7,201 contracts, which relative to volume is approximately 40% above average meaning that liquidation was heavy on the modest decline. The September contract accounted for loss of 8,184 of open interest. In the latest COT report, managed money remains long by ratio of 1.05:1, but this is down from the previous week of 1.10:1 and the ratio of 2 weeks ago of 1.15:1. Despite the dramatic move lower from the high of $4.874 made on June 16, it is remarkable that managed money still continues to hold a net long position.Looking at the chart, it appears that natural gas has been consolidating since June 23, and from this base a move higher is likely beginning in fall. September natural gas remains on a short and intermediate term sell signal. Stand aside.

Copper:

September copper lost 1.65 cents on volume of 53,454 contracts. Total open interest declined by 1,857 contracts, which relative to volume is approximately 40% above average meaning that unusually large numbers of market participants were liquidating as prices move lower. This is healthy open interest action relative to the price decline. As this report is being compiled on August 4, September copper is trading 2.50 higher on the day. Copper has been acting very well in the face of lower equity, petroleum, precious metal and grain prices. September copper remains on a short and intermediate term buy signal. We have no recommendation

Gold:

December gold advanced $12.00 on volume of 153,864 contracts. Total open interest declined by a massive 9,542 contracts, which relative to volume is approximately 140% above average meaning that extraordinarily large numbers of market participants were liquidating as prices advanced. This is very bearish open interest action relative to the price advance on Friday. Furthermore, it was the second-highest open interest decline since gold topped out at 1347.50 on July 10. The largest open interest decline occurred on July 29 when gold lost 5.00 on volume of 354,549 and total open interest declined by 13,588 contracts. As this report is being compiled on August 4, December gold is trading $6.10 lower and has made a daily low of 1287.00.Gold remains on a short-term sell signal, but an intermediate term buy signal.

Platinum: On August 1, October platinum generated a short-term sell signal, but remains on an intermediate term buy signal.

October platinum lost $1.90 on volume of 12,033 contracts. Total open interest declined by an extraordinarily large 1,335 contracts, which relative to volume is approximately 340% above average, meaning that liquidation was off the charts heavy. The most recent COT report showed managed money long platinum by a massive 23.61:1, therefore massive liquidation at the lower end of the trading range should come as no surprise. As this report is being compiled on August 4, October platinum is trading $1.10 lower on the day, but has not taken out Friday’s low of 1456.30. Stand aside.

Silver:

September silver lost 4.1 cents on heavy volume of 53,435 contracts. Volume was the highest since July 24 when September silver lost 58 cents on volume of 67,327 and total open interest declined by 1,718 contracts.On August 1, total open interest declined by a massive 3,102 contracts, which relative to volume is approximately 130% above average meaning that liquidation was extremely heavy on the modest decline. On August 1, September silver made a low of 20.245, and this has been taken out on August 4 (20.200), which is the lowest print since 19.875 made on June 19. Looking at the charts, there is no support until the 19.49 area. September silver remains on a short-term sell signal, but an intermediate term buy signal.

Euro:

The September euro advanced 38 pips on heavy volume of 219,406 contracts.Volume was the highest since June 12 when 347,446 contracts were traded and the September euro closed at 1.3568. On August 1, total open interest increased by 3,042 contracts, which relative to volume is approximately 40% below average. The euro is oversold relative to its 20 day moving average of 1.3505. The euro remains on a short and intermediate term sell signal. Stand aside.

British pound:

The September British pound lost 51 pips on heavy volume of 133,915 contracts.Volume was the highest since June 13 when 199,017 contracts were traded and the September pound closed at 1.6955. On August 1, total open interest declined by 2,293 contracts, which relative to volume is approximately 30% below average. On August 1, the September pound made a new low for the move at 1.6805, which is the lowest print since 1.6775 made on June 12. As this report is being compiled on August 4, the pound is trading 21 pips higher and has made a low of 1.6808, 3 pips above Friday’s low.

From its high close of 1.7153 on July 2 through August 1, the September pound has lost 3.28 cents.From the close of 1.7138 on July 15, before the carnage began through July 31,  total open interest has declined by a healthy 22,281 contracts, or approximately 8.75% of total open interest. In our view, this means the pound will make a bottom sooner than if market participants were fighting the decline, which would only prolong the agony. Stand aside.

Australian dollar: On August 1, the September Australian dollar generated a short-term sell signal, but remains on an intermediate term buy signal.

The September Australian dollar advanced 20 pips on heavy volume of 128,233 contracts.Volume was the strongest since July 30 when the September Australian dollar lost 59 pips on volume of 129,242 contracts and total open interest declined by 739 contracts. On August 1, total open interest declined by 2821 contracts, which relative to volume is approximately 15% below average. As this report is being compiled on August 4, the September Australian dollar is trading 20 pips higher on the day.After the generation of a sell signal, the market has a tendency to rally from 1-3 days and this is the opportunity to initiate bearish positions if you are so inclined. We have no recommendation at this juncture.

Coffee: On August 1, September coffee generated an intermediate term buy signal after generating a short-term buy signal on July 24.

September coffee lost 2.70 cents on very heavy volume of 47,886 contracts. Volume took out the previous high of 41,847 contracts traded on July 31 when September coffee advanced 12.55 cents and total open interest increased 144 contracts. On August 1, total open interest increased 522 contracts, which relative to volume is approximately 50% below average. The market had a wild ride on August 1 and the range traded was 15.80 cents. As this report is being compiled on August 4, September coffee has closed 1.85 cents lower after making a daily low of 1.8330.

In the July 24 report, OIA recommended the initiation of the small bullish position and despite a lower close on August 4, clients should have a significant profits. The market clearly got ahead of itself, and as we said in prior reports, coffee has been overdue for correction. The action on August 4 may signify that a bottom has been put in at 1.8330.There may be some more downside, but we suspect the worst is over for now. The trend for coffee is higher, however, we caution that clients should not let this winning trade turn into a losing trade. If the market moves to a level that is close to your purchase price, liquidate the position rather than ride it out.