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The USDA releases its crop production and supply-demand report tomorrow at 11:00 am CDT.

Soybeans;

November soybeans gained 6.75 cents on total volume of 121,818. Total open interest increased by 2,799, which relative to volume is 10% below average. The August contract lost 877 of open interest and November experienced a decline of 1,103 contracts. In short there were sufficient open interest increases in the forward months to offset the declines of August and November. This is positive. As this report is being compiled on August 11, November soybeans  are trading 6.25 cents lower after making a daily high of 10.89 1/4, which is the highest print since July 30 (10.98 1/4. Stand aside.

Corn:

September corn lost 7.75 cents on heavy volume of 328,027 contracts. Volume declined slightly from August 7 when 329,908 contracts were traded and September corn lost 3.75 cents while total open interest declined by 12,446 contracts. On August 8, total open interest declined by 8,108 contracts, which relative to volume is approximately average.The September contract accounted for loss of 32,939 of open interest. As this report is being compiled on August 11, September corn is trading 4.50 higher on the day after making a new contract low of $3.50 1/2. Stand aside.

Chicago wheat:

September Chicago wheat lost 12.25 cents on heavy volume of 157,813 contracts. Volume declined from August 7 when September Chicago wheat lost 6.50 cents on volume of 165,430 contracts and total open interest declined by 4,868 contracts. On August 8, total open interest declined by 4,807 contracts, which relative to volume is approximately 20% above average meaning that liquidation was heavier than usual. The September contract accounted for loss of 13,678 of open interest.As this report is being compiled on August 11, September Chicago wheat is trading unchanged on the day after making a new low for the move at 5.43, which is the lowest print since 5.38 made on August 5.On August 7, September and December Chicago wheat generated a short-term buy signal, and today is the second day of the usual 1-3 day pullback. The real test will be tomorrow, and if we begin to see renewed strength in wheat, there may be a trading opportunity on the long side. As we’ve said before we would like to see strength in the Kansas City contract. Chicago wheat remains on an intermediate term sell signal.

Kansas City wheat:

September Kansas City wheat lost 17.00 cents on very heavy volume of 34,479 contracts.Volume was the strongest since June 18 when 34,471 contracts were traded and the September Kansas City contract closed at 7.27 1/4. On August 8, total open interest declined by 1,300 contracts, which relative to volume is approximately 50% above average. The September contract accounted for loss of 4,772 of open interest. As this report is being compiled on August 11, Kansas City wheat is trading 3.25 cents lower on the day. Kansas City wheat remains on a short and intermediate term sell signal.Stand aside.

Live cattle:

October live cattle closed down the 3 cent limit on total volume of 50,157 contracts. Total open interest declined by 3,052 contracts, which relative to volume is approximately 140% above average meaning that liquidation was extremely heavy despite most of the live cattle contracts being locked down the limit for most of the session, The August 2014 through April 2015 contracts all lost open interest. As this report is being compiled on August 11, October live cattle is trading closed unchanged after making a new low for the move at 1.47850. The market is oversold, but we think rallies will not get far due to the large number of speculative longs who will be looking to trim their positions to reduce losses or increase gains. Stand aside.

WTI crude oil:

September WTI crude oil advanced 31 cents on volume of 552,342 contracts. Total open interest declined by 6,942 contracts, which relative to volume is approximately 45% less than average. The September contract lost 19,724 of open interest. As this report is being compiled on August 11, September WTI is trading 35 cents higher on low volume. As we said in the weekend report, we find it remarkable that the geopolitical situation in Iraq combined with the dramatic decline in US inventories over the past 6 weeks is not doing more to boost the price of WTI. Continue to hold the short call position recommended on July 21.

Natural gas:

September natural gas advanced 8.6 cents on volume of 285,482 contracts. Volume fell from August 7 when September natural gas lost 5.7 cents on volume of 367,333 contracts and total open interest declined by 2,482 contracts. On August 8, total open interest increased by 3,214 contracts, which relative to volume is approximately 50% below average. However, the September contract lost 17,651 of open interest, which means there was sufficient open interest increases in the forward months to offset the decline in the September contract and bring total open interest to a positive number.As we said in the August 10 report, the September contract must make a daily low above OIA’s key pivot point of 4.000 and for the October contract a daily low above 4.010 in order to generate a short-term buy signals. Until this occurs, natural gas will trade sideways to lower, and possibly attempt to test the July 28 low. As this report is being compiled on August 11, the September contract is trading 1.2 cents lower after making a new high for the move at $4.012. Stand aside.

From the August 10 Weekend Wrap:

“From the time September natural gas made its low on July 28 through August 8, the market has closed positively 6 times and closed lower on 3 occasions. For September natural gas to generate a short-term buy signal, the low the day must be above OIA’s key pivot point of $4.000. 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.”

Gold:

December gold lost $1.50 on volume of 166,617 contracts. Volume increased substantially from August 7 when December gold advanced 4.30 on volume of 137,163 contracts and total open interest increased by 1,219 contracts. On August 8, total open interest declined by 3,536 contracts, which relative to volume is approximately 20% below average. Gold rallied to a high of 1324.30 on the worsening situation in Iraq and further tensions in Ukraine, however the market could not hold the gains and ended up closing lower. As this report is being compiled on August 11, December gold is trading 1.10 lower on the day. December gold remains on a short and intermediate term sell signal. Stand aside.

Silver:

September silver lost 4.9 cents on heavy volume of 67,270 contracts. Volume increased from August 5 when September silver lost 40 cents on volume of 65,788 contracts and total open interest increased by 493 contracts. On August 8, total open interest declined by 512 contracts, which relative to volume is approximately 55% below average. The September contract accounted for loss of 4,528 of open interest. As this report is being compiled on August 11, September silver is trading 11.4 cents higher on the day. Although gold is on a short and intermediate term sell signal, silver is on a short-term sell signal (July 28), but an intermediate term sell signal. Stand aside.

Euro:

The September euro gained 53 pips on volume of 208,202 contracts. Total open interest declined by 9,192 contracts, which relative to volume is approximately 75% above average meaning that liquidation was extremely heavy on the advance. Based upon the latest reading from the COT report we know that leveraged funds are short the euro by ratio of 2.81:1, which is the highest reading in at least 3 weeks. This means there are large numbers of new speculative short sellers who subject themselves to potentially significant losses due to their positioning at the lower end of the trading range. The euro remains on a short and intermediate term sell signal. Stand aside.

British pound:

The September British pound lost 59 pips on volume of 101,879 contracts. Total open interest declined by 2,989 contracts, which relative to volume is approximately 25% above average meaning that liquidation was heavier than normal. Though leveraged funds remain long the pound by ratio of 2.38:1, it is apparent that they are not digging in and have been liquidating on price declines ever since the pound topped in early July. The September pound remains on a short and intermediate term sell signal. Stand aside.

Coffee:

September coffee lost 3.15 cents on heavy volume of 43,744 contracts. Volume fell somewhat from August 7 when September coffee lost 6.85 cents on volume of 45,696 contracts and total open interest declined by 1,001 contracts. On August 8, total open interest declined by a massive 3,746 contracts, which relative to volume is approximately 240% above average meaning that liquidation was off the charts heavy. As this report is being compiled on August 11, September coffee is trading sharply higher + 6.05 cents on heavy volume. It will be important to see open interest increase substantially on today’s rally. Although we advised the liquidation of bullish positions last week, there is plenty of time to get on the long side of coffee.We are concerned about the very large long position held by managed money according to the latest COT report. However, if September coffee makes a daily low above 1.8880 in tomorrow’s trading, it becomes highly likely the market is headed higher in the very short-term.

From the August 10 Weekend Wrap:

Additionally, with managed money holding a sizable net long position based upon the most recent COT report, there certainly is enough fuel to fund a continued downside move. Since the tabulation of the report on August 5, total open interest on August 6 declined by 338 contracts and -1,001 contracts on August 7. This isn’t much considering the net long position of manage money increased by 4,284 contracts from the July 29 tabulation to the August 5 report. In the same time frame in the category of “Other Reportables” the net long position declined from 5,673 contracts on July 29 to 4,751 on August 5 (- 922). We think coffee prices are ultimately headed higher, and OIA will be looking for an a spot to recommend the initiation of bullish positions when the time is right.