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On August 12, the USDA will release its monthly WASDE report and we advise clients to stand aside prior to the report.

Soybeans:

November soybeans gained 3.00 cents on light volume of 126,877 contracts. Volume increased slightly from August 8 when the November contract advanced 10.50 cents on volume of 120,025 contracts and total open interest declined by 1,017, a bearish reading. On August 9, total open interest declined by 355 contracts, which relative to volume is approximately 85% below average, but the total open interest decline on yesterday’s advance continues the bearish action that we have seen for the past couple of weeks. The August contract accounted for a loss of 463 of open interest. The November contract made a high of 9.99 1/4, which was the highest print since 10.00 made on August 1.

Despite the rally, both longs and shorts were liquidating, which is the scenario we outlined for readers after became apparent that managed money was not liquidating their long positions as prices moved lower.

As this report is being compiled on August 10, the November contract is trading 11. 25 cents lower and has made a daily low of 9.76 1/2, which takes out yesterday’s print of 9.77 1/4 and is the lowest since 9.70 1/2 made on August 8.On July 6, OIA announced that soybeans generated a short term sell signal and an intermediate term sell signal on July 20. For speculative accounts, stand aside.

Corn: 

September corn lost 3.00 cents on robust volume of 366,278 contracts. Volume declined from August 8 when the September contract gained 1.00 cents on volume of 399,689 contracts and total open interest increased by 13,742, and this means that a battle ensued between buyers and sellers and buyers had a slight edge.

On August 9, total open interest increased by 7,243 contracts, which relative to volume is approximately 20% below average, but yesterday’s total open interest increase on the price decline continues the bearish open interest action that we’ve seen relative to price advances and declines. Additionally, the September contract lost 24,062 of open interest, which means there were sufficient open interest increases in the forward months offset the decline in September and increase total open interest.

As this report is being compiled on August 10, the September contract is trading nearly unchanged and has made a daily low of 3.21 1/4, which is the lowest print since 3.20 made on August 5. The USDA report is going to be a major mover for corn and if yields are raised substantially, we expect to see corn prices breakdown into new low territory and take out the September-October low of 3.18. For speculative accounts, stand aside.

Live cattle:

October live cattle gained 35 points on light volume of 38,042 contracts. Volume declined somewhat from August 8 when the October contract lost 87.5 points on volume of 38,888 contracts and total open interest declined by 1,910. On August 9, total open interest declined by a massive 1,721 contracts, which relative to volume is approximately 75% above average meaning that both longs and shorts were liquidating as prices moved fractionally higher. The August contract lost 1,051 of open interest and October lost even more: -1,186.

As this report is being compiled on August 10, the October contract is trading nearly unchanged on the day on very low volume. We see no compelling reason to recommend bullish positions at this juncture even though we think there is a strong possibility that once prices have consolidated sufficiently cattle will move higher. As stated before, we want to see the 20 day moving average (112.159) move above the 50 day moving average of (113.060). Additionally we want to see open interest action improve and with a few exceptions it has been abysmal.

WTI crude oil:

September WTI crude oil lost 25 cents on strong volume of 1,180,803 contracts. Total open interest increased by 8,116 contracts, which relative to volume is approximately 55% below average, however the September contract lost 62,652 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 slightly. Yesterday’s action was bearish and this followed the bearish action on August 8 when the September contract gained $1.22 on volume of 1,197,395 contracts and total open interest declined by 17,664.

As this report is being compiled after the release of the EIA storage report, September crude is trading 76 cents below yesterday’s close and has made a daily low of 41.82, which is 1 penny above the August 8 print of 41.81. Additionally, it is made a daily high of 43.39, which is below yesterday’s print of 43.52. September WTI remains on short and intermediate term sell signals. Stand aside.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.1 million barrels from the previous week. At 523.6 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories decreased by 2.8 million barrels last week, but are well above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 2.0 million barrels last week but are near the upper limit of the average range for this time of year. Propane/propylene inventories rose 2.0 million barrels last week and are near the upper limit of the average range. Total commercial petroleum inventories increased by 2.5 million barrels last week.

Natural gas: September and October natural gas will generate short term sell signals on August 10, but remain on intermediate term buy signals. However, the September contract is getting close to generating an intermediate term sell signal.

September natural gas lost a massive 13.3 cents on very heavy volume of 555,983 contracts. Volume was the strongest since July 28 when the September contract gained 21.3 cents on volume of 559,365 contracts and total open interest increased by a massive 21,059 contracts. On August 9, total open interest increased by 17,874, which relative to volume is approximately 20% above average, and an open interest increase on yesterday strong decline is bearish. The September contract lost 17,730 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in the September contract and increase total open interest above average.

As this report is being compiled on August 10, the September natural gas contract is trading lower again, down 4.4 cents or -1.68% and has made a daily low of $2.551, which slightly takes out the June 17 print of 2.554. As we have said before, there will be a terrific opportunity in natural gas on the long side, but this is likely a couple of weeks away. Continue to stand aside.

British pound: On August 9 the September and December British pound generated short term sell signals, which reversed the August 3 short term buy signals. Both contracts remain on intermediate term sell signals.