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Soybeans:

November soybeans lost 5.00 cents on light volume of 116,156 contracts. Total open interest increased by 2,390 contracts, which relative to volume is approximately 20% below average. The September contract lost 2,160 of open interest. As this report is being compiled on the August 20, November beans are trading 10.50 lower and have made new lows. The previous contract low of 10.38 3/4 made on August 14. The critical growing period of August is 60% over and conditions have been ideal. This is going to weigh on the market and there will be minor short covering rallies, but the trend is lower. Stand aside.

Soybean meal:

December soybean meal lost $2.40 on volume of 77,140 contracts.Total open interest declined by 1,675 contracts, which relative to volume is approximately 15% below average. The September contract accounted for loss of 4,723. As this report is being compiled on August 20, December soybean meal is trading sharply lower, down 7.30. For a while, it looked like soybean meal was going to be a candidate for a short-term buy signal, but was unable to make a daily low above OIA’s pivot point.December soybean meal remains on a short and intermediate term sell signal. Stand aside.

Corn:

December corn advanced 0.75 cents on volume of 246,733 contracts. Total open interest increased by 4,621 contracts, which relative to volume is approximately 20% below average. The September contract lost 15,637 of open interest, which makes the total open interest increase neutral. As this report is being compiled on August 20, December corn is trading 6.25 cents lower and is about 8 cents from its contract low (3.58). Stand aside.

Chicago wheat:

December Chicago wheat advanced 4.25 cents on volume of 108,754 contracts. Total open interest declined by 4,471 contracts, which relative to volume is approximately 55% above average meaning that liquidation was substantial on the minor advance. As this report is being compiled on August 20, December Chicago wheat is trading 11.00 cents lower and has made a low of 5.45, which is the lowest print since 5.44 1/4 made on August 14. The contract low for December Chicago wheat is 5.42 1/4. Stand aside.

Live cattle: October cattle will generate an intermediate term sell signal on August 20.

October live cattle lost 1.325 cents on light volume of 39,861 contracts. Total open interest declined only 238 contracts, which relative to volume is approximately 65% below average. The August contract lost 970 of open interest, October -138. As this report is being compiled on August 20, October cattle is trading 1.90 cents lower and has made a new low for the move at 1.44250, which takes out the previous low of 1.44925 made on August 13. As we have stated numerous times, speculators are digging in and refusing to liquidate, and the minor decline of open interest in yesterday’s trading confirms this. Rallies will continue to be muted due to market participants looking to trim losses on advances. Stand aside.

WTI crude oil:

October WTI crude oil lost 89 cents on fairly heavy volume of 664,771 contracts. Volume increased substantially from August 18 when October WTI lost $1.57 on volume of 522,099 contracts and total open interest declined by 7,505 contracts. On August 19, total open interest declined by a massive 34,059 contracts, which relative to volume is approximately 100% above average meaning that liquidation was off the charts heavy in WTI. The September contract accounted for loss of 39,288 of open interest.

As this report is being compiled on August 20, October WTI is trading 24 cents higher, and has not taken out yesterday’s low of 92.62.We always look for signs of potential capitulation, and the massive total open interest decline on August 19 may indicate the market has reached a meaningful low.Additionally, Brent crude also is indicating a possible low in yesterday’s trading. the EIA report released today shows that inventories declined by 4.5 million barrels from the previous week.

Last week, inventories increased by 1.4 million barrels, but the report on August 5  was the 6th consecutive week that crude oil inventories had declined for total of 22.6 million barrels over 6 weeks. Subtracting last week’s inventory build of 1.4 million from this week’s decline means that crude inventories have declined 3.1 million barrels for the past 2 EIA reports. When 3.1 million barrels is added to 22.6 million barrels, inventory has declined during the past 8 weeks by 25.7 million barrels.This is the likely explanation for the inversion of WTI’s term structure.The market is massively oversold and due for a good-sized bounce. The massive liquidation in yesterday’s trading may be the first indication that a rally is likely. Stand aside.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 4.5 million barrels from the previous week. At 362.5 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 increased by 0.6 million barrels last week, and are in the middle of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories decreased by 1.0 million barrels last week and are below the lower limit of the average range for this time of year. Propane/propylene inventories rose 2.5 million barrels last week and are above the upper limit of the average range. Total commercial petroleum inventories decreased by 0.7 million barrels last week.

Brent crude oil:

October Brent crude oil lost 4 cents on volume of 633,959 contracts. Total open interest increased by a massive 27,584 contracts, which relative to volume is approximately 70% above average meaning that a major battle ensued between longs and shorts, and shorts were only able to move the market a bit lower. The October 2014 through September 2015 contracts all gained open interest. The fascinating aspect of trading on August 19 was the refusal of Brent to break down compared to WTI. Additionally, the low of 101.07 on August 19, was only 4 cents lower than the August 18 low of 101.11,whereas the low in WTI on August 19 was 80 cents below that of August 18. The massive increase of open interest in Brent is also another contradiction to WTI, which had a massive decline of open interest. As this report is being compiled on August 20, October Brent is trading 30 cents higher and has made a daily high of 102.37, which is the highest print since August 18 (102.97). We think the short side of Brent and WTI has been played out for now. Stand aside.

Natural gas:

October natural gas advanced 8 cents on volume of 249,169 contracts. Total open interest declined by 1,553 contracts, which relative to volume is approximately 65% below average. The September contract accounted for loss of 6203 of open interest. As this report is being compiled on August 20, October natural gas is trading 6.1 cents lower, and has made a daily high of 3.917, which is below yesterday’s high of 3.940. Natural gas remains on a short and intermediate term sell signal. Stand aside.

Gold:

December gold lost $2.60 on light volume of 84,231 contracts. Total open interest declined by 1,501 contracts, which relative to volume is approximately 25% below average. As this report is being compiled on August 20, December gold is trading 2.70 lower and has made a daily low of 1288.70, which takes out the previous low for the move of 1293.00 made on August 15. December gold remains on a short and intermediate term sell signal. Stand aside.

Silver:

September silver lost 22.3 cents on volume of 48,471 contracts. Total open interest declined by 159 contracts, which relative to volume is approximately 85% below average. The September contract accounted for loss of 3,484 of open interest, and there was sufficient increases of open interest in the forward months to whittle down most of the open interest decline in the September contract. This is bearish open interest action. September silver remains on a short and intermediate term sell signal. Stand aside.

Euro:

The September euro lost 42 pips on volume of 161,771 contracts. Total open interest increased by 2,568 contracts, which relative to volume is approximately 35% below average. As this report is being compiled on August 20, the September euro is trading 56 pips lower and has made a new low for the move at 1.3658, which takes out the previous low on the continuation chart of 1.3294 made on November 7, 2013. Despite the massively oversold condition of the market, the euro continues to trade lower on low volume. However, as the copper market is showing us today, (+7.95 cents) markets can have vicious counter trend rallies that take out large numbers of shorts.The September euro remains on a short and intermediate term sell signal. Stand aside.

British pound:

The September British pound lost 1.08 cents on surprisingly light volume of 98,344. We say this because on August 13, the September pound lost 1.25 cents on volume of 162,642 contracts and total open interest increased by 10,461 contracts. On August 19, total open interest increased by 4,094 contracts, which relative to volume is approximately 60% above average, meaning that new short sellers were aggressively entering the market and driving prices to new lows for the move 1.6607. However, this low has been taken out on August 20 (1.6587). The September British pound generated a short-term sell signal on July 25 and an intermediate term sell signal on August 7. Stand aside.

Canadian dollar:

The September Canadian dollar lost 46 pips on volume of 38,764 contracts. Total open interest increased by 2,104 contracts, which relative to volume is approximately 120% above average meaning that aggressive new short sellers were entering the market and driving prices lower.The September Canadian dollar is headed to support at 90.94 made on August 6.However, we do not think the support will hold. The September Canadian dollar generated a short-term sell signal on July 28 and an intermediate term sell signal on July 31. Stand aside.

Coffee:

December coffee lost 6.95 cents on volume of 26,317 contracts. Volume was below that of August 18 when December coffee lost 5 points on volume of 30,548 contracts and total open interest declined by 1,999 contracts.On August 19, total open interest declined by a massive 1,652 contracts, which relative to volume is approximately 140% above average meaning that liquidation was heavy on the decline. This is positive open interest action relative to the price decline. The September contract lost 3,906 of open interest.

As this report is being compiled on August 20, December coffee has closed at 1.8895, up 2.80 cents from yesterday’s close. December coffee made a daily low of 1.8295 on August 20, which is the lowest print since 1.8225 made on July 29. On August 8, the market made interim low at 1.8360. The low of August 20 should be used as an exit point for all bullish positions, and clients have had plenty of opportunities yesterday and today to initiate bullish positions. As we pointed out in yesterday’s report, and it is worth repeating: coffee is extremely volatile and it is not everyone’s cup of tea. Expect to see big moves up and down, and we have recommended options as the safest way to trade coffee.We think the market is going considerably higher and will eventually test the April 23 contract high of 2.2260.

From the August 18 report: 

In yesterday’s report, we suggested that clients should look to position themselves on the long side of the market. We still think this makes sense however, we have strongly recommended using options, which will help mitigate risk compared to trading futures, especially if bull call spreads or bull put spreads or used. Expect to see more volatile trading on the up and downside until the market is ready to make a major move higher.Many people should not trade coffee due to its extreme volatility, and if you are not comfortable with high amounts of it, stand aside. The first sign of trouble would be a close below 1.7615 in the December contract.