The USDA will release its crop production and supply-demand report on Tuesday August 12.

For Bloomberg access: {OIAR<GO>}

Soybeans:

November soybeans lost 2.00 cents on light volume of 115,114 contracts.Volume was the weakest since May 30 when 104,984 contracts were traded and November beans closed at $12.33 3/4. On August 7, total open interest increased by 3,321 contracts, which relative to volume is approximately 5% above average. The August contract lost 1,054 of open interest. As this report is being compiled on August 8, November beans are trading 1.50 lower on the day in a very slow lackluster trading. November beans remain on a short and intermediate term sell signal. Stand aside.

Corn:

September corn lost 3.75 cents on huge volume of 329,908 contracts.Volume was the heaviest since June 30 when 475,189 contracts were traded and September corn closed at $4.18 3/4. On August 7, total open interest declined by a massive 12,446 contracts, which relative to volume is approximately 50% above average meaning that liquidation was extremely heavy on the decline. The September contract accounted for loss of 36,738 of open interest. As this report is being compiled on August 8, September corn is trading 6.00 lower, and now appears to be making a new contract low. September corn remains on a short and intermediate term sell signal. Stand aside.

Chicago wheat: On August 7, September and December Chicago wheat generated a short term buy signal, but remain on an intermediate term sell signal.

September Chicago wheat lost 6.50 cents on huge volume of 165,430 contracts. Volume increased from August 6 when September wheat advanced 15.50 on volume of 155,195 contracts and total open interest declined by just 9 contracts. Additionally, volume was the highest since April 9 when 203,301 contracts were traded and September Chicago wheat closed at 6.87.On August 7, total open interest declined by 4,868 contracts, which relative to volume is approximately 20% above average, meaning that market participants were liquidating at a higher than average rate.

The September contract accounted for loss of 15,864 of open interest. As this report is being compiled on August 8, September Chicago wheat has made a low of 5.47 and yesterday, the market closed at 5.61, but the high for August 8 is 5.61 1/2. In short the market doesn’t have the momentum to trade much beyond yesterday’s closing price.Usually, after the generation of a buy signal, the market has a tendency to pullback from 1-3 days. We are watching the market carefully for a possible reversal of signal, especially because the Kansas City contract is performing poorly.

Kansas City wheat:

September Kansas City wheat lost 10.00 cents on heavy volume of 29,890 contracts. Volume exceeded trading on July 29 when September KC wheat lost 14.00 cents on volume of 29,285 contracts and total open interest declined by 70 contracts as September KC wheat made its new low for the move at 6.11. On August 7, total open interest has declined for the 4th day in a row, this time by 1,525 contracts, which relative to volume is approximately 100% above average meaning that liquidation was extremely heavy on the decline. As this report is being compiled on August 8, September KC wheat is trading 16.25 lower while Chicago is trading 11.50 on the downside.

The spread between Kansas City wheat and Chicago has been narrowing ever since it topped out on June 18. On that day, the September 2014 KC wheat-September Chicago wheat spread closed at $1.31 premium to September KC wheat. Yesterday, the spread closed at 84.75 premium to KC wheat and the spread continues to narrow. We would like to see the spread turnaround and see Kansas City wheat begin to outperform Chicago wheat, especially since the fundamentals for Kansas City wheat are far more bullish than Chicago.

Live cattle: On August 7, October cattle generated a short-term sell signal, but remains on an intermediate term buy signal.

October live cattle lost 2.95 cents on heavy volume of 71,843 contracts.Volume was the strongest since July 24 when October cattle advanced 50 points on volume of 86,614 contracts and total open interest declined by 3390 contracts. On August 7, total open interest declined by 2,523 contracts, which relative to volume is approximately 40% above average meaning that liquidation was heavy on the near limit decline.As this report is being compiled on August 8, October cattle is trading down the 3 cent limit. The market is trading below its 50 day moving average, and the next area of support is OIA’s key pivot point of 1.47180. As we have said before, we don’t think the bull market is over, but under no circumstances should clients attempt to pick a bottom. Stand aside.

WTI crude oil:

September WTI crude oil advanced 42 cents on heavy volume of 669,428 contracts. Volume was the highest since 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 7, total open interest kris by 5,841 contracts, which relative to volume is approximately 60% below average. The September contract accounted for loss of 18,407 of open interest. Yesterday during the overnight session, WTI rallied to a high of 98.45 on news of the targeted bombing in  Iraq. The Brent contract rallied to a high of 107.45, and is now trading 47 cents lower on the day at 105.60 while September WTI is trading 26 cents higher. Additionally, heating oil is trading 1.74 cents lower while gasoline is -1.37 cents. In short, the market overreacted to political events , and the down trend is intact. Continue to hold the short call position recommended in the July 21 report. 

Natural gas:

September natural gas lost 5.7 cents on heavy volume of 367,333 contracts.Volume was the strongest since July 17 when natural gas lost 16.5 cents on volume of 416,876 contracts and total open interest declined by 6,716 contracts. On August 7, total open interest declined by 2,482 contracts, which relative to volume is approximately 65% below average. The September contract lost 16,985 of open interest and there were sufficient open interest increases in the forward months to offset much of the decline in the September contract.We consider this to be bearish as it indicates that new short sellers in the forward months were fairly aggressive in initiating new positions and were driving prices lower. However, as this report is being compiled on August 8, September natural gas is trading 8.5 cents higher and though it has not taken out the August 7 high of 3.981, it appears to be on course to do so. Since making its low for the move of 3.725 on July 28, natural gas has been trading irregularly higher.For September natural gas to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point of 4.000. Stand aside.

Copper:

September copper advanced 1.00 cent on huge volume of 86,023 contracts.Volume was the strongest since June 25 when 86,359 contracts were traded and September copper closed at $3.1660. On August 7, total open interest declined by a massive 5,211 contracts, which relative to volume is approximately 140% above average. For the past 3 days beginning on August 5, market participants have been bailing out of copper and the open interest decline for the three-day period totals 12,986 contracts while September copper lost 6.8 cents. On August 6, September copper generated a short-term sell signal, but remains on an intermediate term buy signal. Stand aside.

Gold:

December gold advanced $4.30 on light volume of 137,163 contracts. Total open interest increased by 1219 contracts, which relative to volume is approximately 55% below average. As this report is being compiled on August 8, December gold is trading $1.80 lower after making a high of 1324.30 in the evening session on August 7. The increased tension and turmoil in Iraqi was the reason for the advance as petroleum prices advanced and equities were sharply lower. As we said in yesterday’s report, for December gold to generate a short-term buy signal, the daily low must be above OIA’s key pivot point of 1315.30 and the low for August 8 has been 1305.7. December gold remains on a short and intermediate term sell signal. Stand aside.

Silver:

September silver lost 3.4 cents on volume of 55,369 contracts. Volume fell from August 6 when September silver advanced 19.1 cents on volume of 64,164 contracts and total open interest declined by 728 contracts. On August 7, total open interest increased by 1759 contracts, which relative to volume is approximately 25 percent above average meaning that new short sellers were entering the market at an above average rate and driving prices fractionally lower. As this report is being compiled on August 8, September silver is trading 3.5 cents lower and has taken out yesterday’s low of 19.88. On July 28, September silver generated a short-term sell signal, but remains on an intermediate term buy signal. Stand aside.

Australian dollar: The September Australian dollar will generate an intermediate term sell signal on August 8 after generating a short-term sell signal on August 1.

The September Australian dollar lost 79 pips on volume of 105,283 contracts. Total open interest increased by 1212 contracts, which relative to volume is approximately 50% below average. However, this is the first open interest increase on a decline since the Aussie dollar generated a short-term sell signal. As this report is being compiled on August 8, the Australian dollar is trading 10 pips higher and has made a new low for the move at 92.16, which is the lowest print since 91.94 made on June 5.Stand aside.

British pound: On August 7, the September British pound generated an intermediate term sell signal after generating a short-term sell signal on July 25.

The September British pound lost 11 pips on volume of 71,831 contracts. Total open interest declined by 568 contracts, which relative to volume is approximately 65% below average. As this report is being compiled on August 8, the September pound is trading 56 pips lower and has made a new low for the move at 1.6761, which is the lowest print since 1.6726 made on June 11.

10 year Treasury Note:

The September 10 year Treasury Note advanced 13.5 points on volume of 1,363,758 contracts. Total open interest increased 17,840 contracts, which relative to volume is approximately 45% less than average. As this report is being compiled on August 8, the September note is trading 2 points higher on the day and has made a new high for the move at 126-175, which is the highest print since May 29 (126-245).On August 6, the September note generated a short-term buy signal, which reversed the short-term sell signal of July 31. It remains on an intermediate term buy signal. Stand aside.

Coffee:

September coffee lost 6.85 cents on heavy volume of 45,696 contracts. Volume was the strongest since August 1 when September coffee lost 2.70 cents on volume of 47,886 contracts and total open interest increased by 522 contracts. On August 7, total open interest declined by 1,001 contracts, which relative to volume is approximately 15% below average. The September contract lost 8,764 of open interest and there were open interest increases in the forward months to offset much of the decline in the September contract.We consider this to be bearish open interest action relative to the price decline As this report is being compiled on August 8, September coffee is trading lower again, and has closed down 3.15 cents.

As we stated in previous reports, clients should have liquidated bullish positions on August 8 after September coffee dipped below 1.8330, the previous low made on August 4. Although in the August 5 report, we incorrectly thought the worst was over, we were right about liquidating positions at the August 4 low. If clients entered bullish positions when we recommended them, they should have profits even with coffee being sharply lower on August 8. We recommended bullish positions in the July 24 report, which was written on July 25.

We do not think the bull market in coffee is over by any stretch and the decision to liquidate is based upon the very real possibility of coffee reversing short and intermediate term buy signals. September coffee generated a short-term buy signal on July 24 and an intermediate term  buy signal on August 1. September coffee remains on a short and intermediate term buy signal. Stand aside.

From the August 5 report:

“We think the worst of the downside is over, and that the low of 1.8330 made on August 4 is a terrific exit point for the bullish positions we recommended in the report of July 24.”