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Soybeans:

November soybeans gained 17.75 cents on the very light volume of 127,870 contracts. Volume was above the record low for 2016 of 109.595 contracts traded on August 4 . On August 5, total open interest declined by 3,707 contracts, which relative to volume is average. The August contract accounted for a loss of 822 of open interest. The low volume and total open interest declined on Friday confirms the bearish set up for the market.

The COT report, which was released on Friday showed that managed money liquidated 8,348 of their long positions and added 4,327 to their short positions while commercial interests added 1,953 to their long positions and liquidated 20,244 of their short positions. As of the latest report, managed money remains heavily long soybeans, and according to the report were long by a ratio of 5.16:1, though this was down from the previous week of 6.77:1, it was up from the ratio two weeks ago a 5.09:1.

As this report is being compiled on August 8, the November contract is trading 3.00 cents lower and has made a daily high of 9.89, which takes out Friday’s printed 9.79 3/4 and is the highest since 10.00 made on August 1. With the very large contingent of managed money longs remaining in soybeans, if in fact there is a substantial rally, this group will be looking to liquidate on advances, which will keep a lid on rallies unless weather conditions turn severe for an extended period of time. At this juncture, we recommend the stand aside positive for speculative accounts.

Corn:

September corn gained 3.50 cents On heavy volume of 403,746 contracts. Volume was the strongest since August 2 when the September contract lost 1.50 cents on volume of 392,586 contracts and total open interest increased by 11,686. On August 6, total open interest declined by 325 contracts and the September contract lost 33,999 of open interest.

The COT report revealed that managed money added 723 contracts to their long positions and also added a sizable 39,920 to their short positions. Commercial interests added 20,064 to their long positions and liquidated 16,648 contracts of their short positions. As of the latest report, managed money was short by a ratio of 1.72:1, which is up from the previous week’s ratio of 1.46:1 and the ratio two weeks ago of 1.18:1. As we have said before, the market is oversold and well overdue for a rally, however, after this we expect the market to take out the contract low of 3.19 1/2 made on August 2. For speculative accounts, stand aside.

Live cattle:

October live cattle gained 75 points on volume of 47,043 contracts. Total open interest declined by a massive 7,725 contracts, which relative to volume is approximately an off the charts number of 425%. The August contract accounted for a loss of 9,279 of open interest and the October contract lost 523. We continue to be disappointed by the open interest action in live cattle and it has been consistently unimpressive.

For this reason, we continue to recommend a stand aside posture even though cattle remains on a short term buy signal. However, the COT report showed that managed money was becoming friendlier to live cattle and added 3,862 to their long positions and liquidated 7,602 of their short positions. Commercial interests liquidated 1,010 of their long positions and added 6,807 to their short positions. As of the latest report, managed money is long live cattle by ratio of 2.28:1, which is up substantially from the previous week of 1.72:1 and the ratio two weeks ago of 1.60:1.

The 20 day moving average of 111.630 remains substantially below the 50 day moving average of 113.280 and we want to see the 20 day moving average cross above the 50 day moving average, which means that prices need to stay elevated  above the 50 day moving average for an extended period of time. This leads us to think that prices may consolidate for a while before resuming the uptrend. Still, we want to see an improvement in open interest action relative to price advances and declines. As this report is being compiled on August 8 the October contract is trading 60 points lower on the day.

WTI crude oil: We want to call your attention to an inverse head and shoulders pattern on the weekly continuation chart for WTI. This is potentially bullish and the neckline of the two shoulders is approximately $51.00. A breakthrough the neckline could send WTI prices sharply higher, but we do not expect this to occur in the near future. It is something that should be on your radar screen.

September WTI crude oil gained 5 cents on strong volume of 1,063,756 contracts. Total open interest increased by 8,321 contracts, which relative to volume is approximately 55% below average, but an open interest increase on Friday’s advance is positive. Additionally, the September contract accounted for a loss of 45,332 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in September and increase total open interest.

For the past three days beginning on August 3 volume traded has been over 1 million contracts per day and this has occurred when crude oil prices are advancing. This is a distinct contrast to the period prior to August 3 when prices were declining and volume was contracting. Rising volume on advances is positive.

The COT report revealed that true the form, managed money got extremely bearish at the low end of the trading range. They added 1,022 to their long positions and added 36,938 to their short positions. Commercial interests added 17,641 to their long positions and also added 11,183 to their short positions. As of the latest report, managed money was long WTI crude oil by ratio of 1.28:1, which is down from the previous week of 1.53:1 and the ratio two weeks ago of 1.89:1. Three weeks ago, managed money was long WTI by a ratio of 2.20:1. As this report is being compiled on August 8 the September contract is rocketing higher, up $1.25 or +2.99% and has made a daily high of 43.16, which is the highest print since 43.20 made on July 27. Stand aside.

From the August 3 research note on WTI:

“Yesterday, the September contract made a low of 39.19, which is the lowest print since 38.67 made on April 5. We think it is highly likely the April 5 low will hold and that the bearish trade has been played out for now. This is not to say that a test of yesterday’s low will not occur, rather that the easy money has been made.”

Copper: On August 5, September and December New York copper generated a short term sell signals, but remain on intermediate term buy signals.

The COT report revealed that managed money liquidated 4548 of their long positions and added 6769 to their short positions. Commercial interests added 1994 to their long positions and also added 70 contracts to their short positions. As of the latest report, managed money is long copper by a ratio of 1.71:1, down sharply from the previous week of 2.57:1 and down slightly from the ratio two weeks ago of 1.78:1. We have no recommendation.

Silver: September and December silver are getting close to generating short term sell signals and the September contract will generate a short term sell signal if the daily high is below OIA’s key pivot point for August 8 of $19.866. On August 8 the September contract has made a high of 19.890, above the pivot point.

September silver lost 71.8 cents on heavy volume of 98,751 contracts. Total open interest declined by a massive 5,722 contracts, which relative to volume is approximately 125% above average meaning liquidation was extremely heavy on Friday’s huge decline.

The COT report revealed that managed money liquidated 2,710 of their long positions and added 3,281 to their short positions. Commercial interests liquidated 1,619 of their long positions and added 460 to their short positions. As of the latest report, managed money is long silver by a ratio of 8.82:1, down sharply from the previous week of 12.66:1 and the ratio two weeks ago a 12.69:1. The tabulation date for this week’s report is tomorrow and we expect that the net long position of managed money in silver has again been reduced substantially. As this report is being compiled on August 8 the September contract is trading nearly unchanged on the day. Stand aside.

Gold: We want to inform clients that on the weekly gold continuation chart, the 50 week moving average of 1196.50 has crossed above the 100 week moving average of 1194.70. This is a long term bullish moving average cross.

December gold lost $26.00 on volume of 246,359 contracts. Total open interest declined by a massive 13,004 contracts, which relative to volume is approximately 110% above average meaning liquidation was extremely heavy on Friday’s large decline. The COT report revealed that managed money added 9,765 to their long positions and also added 2,457 to their short positions. Commercial interests liquidated 2,351 of their long positions and added 9,322 to their short positions. As of the latest report, managed money is long gold by a ratio of 8.53:1, down from the previous week of 8.89:1 and up from the ratio two weeks ago of 8.22:1.

It should be noted that the net long position of managed money has not changed substantially during the past four weeks (three weeks ago managed money was long by ratio of 8.01:1), which means that the market is vulnerable to a continued correction. Additionally, there continues to be talk about a potential rate increase when the Federal Reserve meets in September. We continue to recommend a stand aside posture. December gold remains on short and intermediate term buy signals.

S&P 500 E-mini:

The September S&P 500 E-mini advanced by a strong 17.50 points on light volume of 1,373,277 contracts. Total open interest declined by 3,052, a bearish reading. As this report is being compiled on August 8, the September contract is trading nearly unchanged on the day. The COT report revealed that managed money added 4,362 to their long positions and also added 6,189 to their short positions.. As of the latest report, managed money is short by a ratio of 1.31:1, up from the previous week of 1.26:1 and the ratio two weeks ago of 1.22:1.

There have been some notable billionaires that have recently stated their bearish views  on equities and a number of investment banks are telling the public to be cautious. We agree with this and over the weekend did an analysis of the sectors that comprise the S&P 500. Interestingly, despite the rally to all time highs by the major indices, many sectors have not taken out their 2015 52 week highs.

For example, financials have not taken out the August 10, 2015 high nor has the healthcare sector taken out its August 6, 2015 high along with energy, the 52-week high having been made on November 3, 2015. Even previously strong sectors: telecom and utilities have not taken out the highs of July 5, 2016 and July 6, 2016 respectively. Only the technology sector is keeping up with the S&P 500 having made its 52-week high on Friday. The fact that many sectors are lagging the S&P 500 performance is troubling. We recommend a stand aside posture.