November soybeans lost 41.50 cents on surprisingly light volume of 176,152 contracts. Volume was only slightly above that of July 29 when the November contract gained 25.00 cents on volume of 166,017 contracts and total open interest declined by 2,012, a bearish reading. On August 1, total open interest declined by only 2,665 contracts, which relative to volume is approximately 40% below average. The August contract accounted for a loss of 2,313 of open interest.
We want to emphasize that yesterday’s low volume and minor decline of open interest is bad news for anyone long soybeans. This confirms that longs are digging in and refusing to liquidate despite prices moving to multi-month lows. To reiterate from the COT report: managed money remains long soybeans by ratio 6.77:1, which was up from the previous week of 5.09:1. In summary, there are huge numbers of speculative longs with large losses who will be forced to liquidate as prices move lower.
As this report is being compiled on August 2 the November contract is trading lower by 11.75 and has made a new low for the move of 9.45, which is the lowest print since 9.37 made on April 12. Speculative accounts should continue to stand aside due to the high probability of a counter trend rally.
September corn lost 8.75 cents on surprisingly light volume of 257,825 contracts. Volume was below that of July 29 when the September contract gained 3.25 cents on volume of 275,552 contracts and total open interest increased by 9,086. Additionally, volume was only slightly above that of July 28 when the September contract lost 4.50 cents on volume of 253,007 contracts and total open interest increased by 3,478, a bearish reading. On August 1, total open interest increased massively, this time by 10,153 contracts, which relative to volume is approximately 35% above average. The September contract lost 5,340 of open interest.
As we pointed out in previous reports, the open interest increase on price declines have been occurring at or near contract lows, which indicates a strong degree of confidence among short-sellers that prices are going lower. As this report is being compiled on August 2, the September contract is moving lower and has made a new contract low of 3.19 1/2, which on the continuation chart takes it down to levels last seen in the September-October 2014 time frame.
The low of 3.18 1/4 made during October 2014 looks like it will be taken out and the next area of support on the continuation chart is the September 2009 low of 2.96 3/4. The market is well overdue for a good-sized rally, and we recommend that speculative accounts maintain a stand aside posture.
Live cattle: On August 1, October live cattle generated a short term buy signal and remains on intermediate term sell signal. December live cattle will generate a short term buy signal on August 2 and remain on and intermediate term sell signal.
October live cattle advanced 2.35 cents on heavy total volume of 58,266 contracts. Volume was the strongest since July 25 when the October contract gained the 3.00 cent limit on volume of 55,790 contracts and total open interest increased by 2,123 contracts. On August 1, total open interest increased by a disappointing 950 contracts, which relative to volume is approximately 35% below average. However, the August contract lost 3,467 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in August and increase total open interest. Still, we would have preferred to see a strong open interest increase in yesterday’s trading when October live cattle generated a short term buy signal on strong price action.
Now that October live cattle is on a short term buy signal, the market should experience a pullback lasting 1-3 days before resuming the uptrend. The October contract should find support at the July 26 low of 111.025 and the December contract at 111.700. Wait for the pullback before entering new bullish positions and use the December contract if trading options. Live cattle is entering its strong seasonal time frame and the average gain during the month of August is 1.6%, September +2.1% and October + 2.1%.
WTI crude oil:
September WTI crude oil lost $1.54 on stronger than usual volume of 916,762 contracts. Volume was the heaviest since July 20 when September crude oil gained 21 cents on volume of 917,390 contracts and total open interest declined by 7,267. On August 1, total open interest increased by a sizable 21,439 contracts, which relative to volume is approximately 10% below average, but a strong open interest increase in yesterday’s trading at multi-month lows reveals that market participants are confident prices are going lower. As this report is being compiled on August 2 the September contract is trading lower again, down 68 cents and has made a new low for the move of 39.26, which takes out the April 6 print of 39.49. Continue to hold the short call positions recommended in the June 21 report.
Dollar Index: On August 1, the September and December dollar index generated a short term sell signals. Both contracts remain on intermediate term buy signals.
The September dollar index gained 18.6 points on light volume of 11,579 contracts. Total open interest declined by a massive 1,155 contracts, which relative to volume is approximately 300% above average. As this report is being compiled on August to the September contract is trading sharply lower, down 67.2 points. We have no recommendation.
Euro: On August 1, the September and December euro generated short term buy signals and remain on intermediate term sell signals.
Swiss franc: On August 1, the September and December Swiss franc generated short and intermediate term buy signals.
Yen: On August 1 the September and December yen generated short term buy signals and remain on intermediate term buy signals.
December gold is making new highs for the move on August 2 and has printed $1374.20, which is the highest price since 1383.50 made on July 11. Despite the move higher, December gold will NOT generate a short term buy signal on August 2, which would reverse the July 26 short term sell signal. The low of the day is BELOW OIA’s key pivot point for August 2 of 1356.90 and thus far on August 2 the low has been 1353.70. Tomorrow, we will report on today’s action in gold.
S&P 500 E-mini:
The September S&P 500 E-mini lost 3.75 points on volume of 1,663,759 contracts. Total open interest increased by 13,866 contracts, which relative to volume is approximately 50% below average and a total open interest increase on yesterday’s modest decline is negative. As this report is being compiled on August 2, the September contract is trading sharply lower, down 18.25 points and has made a daily low of 2141.50, which takes the E-mini down to the level last seen on July 14 when it printed 2142.75.
There is a considerable amount of trepidation among the investment community especially since the memory of last year’s August sharp decline is front and center. However we think the market will surprise on the upside during August and fool everybody. For a short term sell signal to occur the daily high must be below OIA’s key pivot point for August 2 of 2134.48.
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