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Soybeans:

November soybeans lost 13.75 cents on heavy volume of 229,887 contracts.Volume was the strongest since July 11 when 255,216 contracts were traded and November beans lost 18.00 cents while total open interest increased by 8,702 contracts and the November contract closed at $10.75. On August 12, total open interest increased by 2,150 contracts, which relative to volume is approximately 50% below average. The August contract lost 488 of open interest, September -513 November -157 and January 2015 -154. The March 2015 contract gained 1,821 of open interest and there was sufficient open interest increases in the forward months to offset the decline in the August through January 2015 contracts. The open interest action on August 12 is most definitely bearish, and as this report is being compiled on August 13, November beans are trading 8.25 lower but have not taken out yesterday’s contract low of 10.43. Stand aside.

The USDA reported that the yield for the 2014-2015 crop increased by 0.2 bushels and increased production by 16 million bushels from the July report. Ending stocks increased by 15 million bushels and total use was left unchanged. The stocks to usage ratio for the 2014-2015 crop is 12.1% up from 4.2% in 2013-2014.

Corn:

December corn, advanced 0.75 cents on huge volume of 561,340 contracts.Volume was the strongest since April 9 when 639,980 contracts were traded and December corn closed at $5.05 1/2. On August 12, total open interest increased by 15,872 contracts, which relative to volume is average. The September contract lost 39,076 of open interest and the December 2014 through May 2016 contracts all gained open interest. December Corn made a new contract low at 3.58 on very heavy volume on the 15 minute chart of 38,892 contracts.The market then proceeded to rally for the rest of the session and closed modestly higher. The contract low on very heavy volume has to be respected as a possible interim low. However, December corn remains on a short and intermediate term sell signal. Stand aside.

The USDA reported that yield for the 2014-2015 crop increased by 2.1 bushels from the July report. Beginning stocks will decline 65 million bushels and production will increase by 172  million bushels. Total use will increase 100 million bushels . Stocks to use ratio increased to 13.5% up from 8.7% in 2013-2014.

Chicago wheat: The December contract will generate a short-term sell signal on August 13. This will reverse the short-term buy signal of August 7.

December Chicago wheat lost 11.50 cents on very heavy volume of 201,470 contracts. Interestingly, volume declined from the 202,059 contracts traded on August 11 when December Chicago wheat lost 3.25 cents and total open interest declined by 4,684 contracts.On August 12, total open interest declined only 835 contracts, which is minuscule and dramatically below average. The September contract accounted for loss of 19,433 of open interest and the December 2014 through September 2015 contracts all gained open interest. As this report is being compiled on August 13, December Chicago wheat is trading 1.25 lower, and has taken out yesterday’s low of 5.46 1/2. Stand aside.

Kansas City wheat:

December Kansas City wheat lost 10.50 cents on huge volume of 37,275 contracts.Volume was the strongest since June 12 when 38,713 contracts were traded and December Kansas City wheat closed at $7.20. On August 12, total open interest increased by 371 contracts, which relative to volume is approximately 50% below average. The September contract accounted for loss of 3,817 of open interest and there were open interest increases in the December 2014 through September 2015 contracts. As this report is being compiled, December KC wheat is trading 3.50 lower and has made a new contract low at 6.18 1/4. Stand aside.

The USDA reported that yields increased by 0.8 bushels from the July report for the 2014-2015 crop and total production increased by 38 million bushels while total usage was increased 35 million bushels. Stocks to usage for the 2014-2015 season increased to 31.3% from the 2013-2014 season of 24.3%.

Live cattle:

October live cattle lost 2.775 cents on volume of 69,755 contracts. Volume shrank from August 11 when October cattle advanced 45 points on volume of 78,732 contracts and total open interest declined by 2,079 contracts. On August 12, total open interest declined only 583 contracts, which relative to volume is approximately 55% below average. The August contract lost 1,085 of open interest, October -1714, December -441. As this report is being compiled on August 13, October cattle is trading 1.450 cents lower and has made a new low for the move at 1.44925.On August 7, October cattle generated a short-term sell signal, but remains on an intermediate term buy signal even as the market trades lower on August 13. Stand aside.

From the August 10 Weekend Wrap: 

“The extremely high ratio of managed money longs in cattle is troubling, and in our view portends even lower prices than we had originally anticipated. The tabulation date for the COT report was August 5 and on August 6,total open interest increased by 2,658 contracts while on Thursday, August 7 total open interest declined by 2,523 contracts. In essence, for the two trading days after the tabulation of the COT report, total open interest was basically a wash indicating that liquidation was minimal.”

“Preliminary stats for trading on August 8 show an open interest decline of 3,016 contracts on volume of 50,157 contracts.With managed money holding a very large net long position, cattle prices are likely to decline further from here. Once October cattle breaks below 1.49000, the next area of support is OIA’s key pivot point of 1.47180 and then 1.46500.Conceivably, cattle could experience a similar style collapse seen in lean hogs due to the large speculative long position.”

WTI crude oil: Cover the short call position recommended in the July 21 report.

September WTI crude oil lost 71 cents on volume of 541,173 contracts. Total open interest increased by 8,919 contracts, which relative to volume is approximately 30% below average. The September contract accounted for loss of 16,078 of open interest, which makes the total open interest increase more impressive (bearish). The increase of open interest on August 12 on a price decline is anomalous behavior for WTI . The last time this occurred was on July 30 when September WTI lost 70  cents on volume of 515,748 contracts and total open interest increased by 8580 contracts.

Since July 30, September WTI has closed lower on 5 occasions, and on each occasion open interest has declined. The open interest increase on August 12 signifies that market participants are getting bearish and are doing so at the low-end of the trading range.We think the market is well overdue for a good-sized bounce and as we said in yesterday’s report, a move to the 20 day moving average of 99.96, or the 100 day moving average of 100.46 seems reasonable.The 200 day moving average for September crude is 97.15. In order for WTI to make another leg down, high of the day must be below the 200 day moving average.

As this report is being compiled on August 13, September WTI is trading 15 cents lower and is made a daily low of 96.75, which is above the low for the move of 96.55 made on August 7. Frankly, we think the short side of WTI has been played out for now, and that the market is more likely to move higher than lower. 

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.4 million barrels from the previous week. At 367.0 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 1.2 million barrels last week, and are in the middle of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories decreased by 2.4 million barrels last week and are below the lower limit of the average range for this time of year. Propane/propylene inventories rose 1.8 million barrels last week and are above the upper limit of the average range. Total commercial petroleum inventories increased by 1.5 million barrels last week.

Natural gas:

October natural gas advanced 1.3 cents on total volume of 289,513 contracts. Total open interest increased by 2,445 contracts, which relative to volume is approximately 55% below average. The September contract accounted for loss of 16,917 of open interest, which makes the total open interest increase more impressive (bullish). However, as this report is being compiled on August 13, October natural gas is trading 13.4 cents lower. Today’s action eliminates gains of the past couple of days and the market is trading at the lowest level since August 5 (3.849). As we stated in the August 10 report, “If natural gas is unable to make its daily low above our pivot points, the market will trade sideways and possibly attempt to test the July 28 low”

From the August 10 Weekend Wrap:

“The October contract will generate a short-term buy signal when the daily low is above OIA’s key pivot point of 4.010. Once this occurs, natural gas should have a pullback lasting 1-3 days and this will be the opportunity to initiate bullish positions. If natural gas is unable to make its daily low above our pivot points, the market will trade sideways and possibly attempt to test the July 28 low. Until the buy signal is generated, we recommend a stand aside posture.”

Copper:

September copper lost 2.00 cents on heavy volume of 73,885 contracts. Volume was the strongest since August 7 when September copper advanced 1.00 cent on volume of 86,023 contracts and total open interest declined by 5,211 contracts. On August 12, open interest declined by 965 contracts, which relative to volume is approximately 45% less than average. The September contract accounted for loss of 5,408 of open interest and there were sufficient open interest increases in the forward months to offset the most of the decline in the September contract. This is bearish open interest action relative to the price decline. As this report is being compiled on August 13, September copper has closed at $3.1120, down 4.25 cents and the lowest close since June 20 (3.1130). On August 6, September copper generated a short-term sell signal and it is likely that September copper will generate an intermediate term sell signal on August 13. Stand aside.

Gold:

December gold advanced 10 cents on light volume of 111,700 contracts. Total open interest increased by 4,530 contracts, which relative to volume is approximately 55% above average meaning a major battle occurred between longs and shorts and neither side was able to move the market much by the close. As this report is being compiled on August 13, December gold has closed at $1314.50, up 3.90 from the previous days close.We continue to like the performance of gold despite it being on a short and intermediate term sell signal. We think it is inevitable December gold will generate a short-term buy signal.

From the August 11 report:

“We are becoming more impressed with gold’s performance ever since it generated a short-term sell signal on July 24. From July 24 through August 11 gold is trading $15.10 higher, or +1.17%. During the same period, silver is trading 1.84% lower. On August 4, December gold generated an intermediate term sell signal, and through August 11 is trading 20.30 higher, or +1.57%.”

“In short, it appears that gold has stabilized and though we cannot rule out further moves to the downside, it appears the bearish side of gold may be playing itself out. The 50 day moving average of 1299.40 is trading above the 200 day moving average of 1289.20, which tilts the bias to the upside. Additionally, gold is not far away from generating a short and intermediate term-term buy signal. If the low the day is above OIA’s key pivot point for August 12 of 1315.40, a short and intermediate term-term buy signal would be generated. The last time December gold closed above the August 12 pivot point occurred on July 21 (1315.50).”

Silver:

September silver lost 19 cents on volume of 59,163 contracts. Total open interest increased by 1,188 contracts, which relative to volume is approximately 20% below average. The September contract accounted for loss of 3,745 of open interest, which makes the total open interest increased more impressive (bearish).Silver continues to underperform gold, and for gold to have an extended run to the upside, silver will have to perform better than it has recently. On July 28, September silver generated a short-term sell signal, but remains on an intermediate term buy signal. Stand aside.

Coffee:

September coffee lost 4.55 cents on heavy volume of 44,199 contracts. Volume declined from August 11 when September coffee advanced 8.30 cents on volume of 45,248 contracts and total open interest increased by 338 contracts. On August 12, total open interest declined by 1232 contracts, which relative to volume is average. The September contract accounted for loss of 8,453 of open interest, and open interest increases in the forward months were able to whittle down the decline in the September contract. We consider this to be bearish open interest action relative to the price decline. OIA thinks the decline of open interest should have been greater, especially because managed money is heavily net long. As this report is being compiled on August 13, September coffee has closed at 1.8525, up 65 points from yesterday’s close. September coffee remains on a short and intermediate term buy signal. Stand aside for now.