In the upcoming Weekend Wrap, we will provide the highlights of today’s USDA report.

Soybeans:

August soybeans lost 13.75 cents and the November contract fell 10.75 cents on total volume of 151,975 contracts. Volume declined from July 9 when August fell 2.00 cents while the November contract lost 12.50 on total volume of 198,372 contracts and total open interest increased by 4,893 contracts. On July 10, total open interest increased 1,052 contracts, which relative to volume is approximately 65% less than average. The July contract lost 673 of open interest, August -756, new crop November -456, but total open interest increased due to open interest builds in the 2015 contracts.

As this report is being compiled on July 11, after the release of the WASDE report by the USDA, August soybeans are trading 44.25 cents lower while the November contract has fallen 13.75. The November contract has taken out the previous contract low of 10.88 1/4 and has made a new contract low of 10.65.The August contract has made a new contract low of 11.59 1/4, which takes out the previous contract low of 11.75.We have been warning clients to stand aside and have been concerned about the relatively high net long position held by managed money. As we pointed out in the July 7 report and have since reiterated this position, managed money needs to get blown out of the market and assume a net short position before soybeans can put in a bottom, or temporary bottom. After this, we expect soybeans to undergo a substantial rally, most likely based on a major weather scare.

From the July 7 report:

“Remarkably, managed money remains long by ratio of 1.76:1, which was down only slightly from the previous week of 1.90:1. Also, managed money actually increased its long position by 600 contracts in the latest report, which is almost inconceivable. Although we think there will be a countertrend rally, probably based on a weather scare in late July or during the critical month of August, there are significant numbers of managed money longs that need to be blown out before the market is on more healthy footing. From July 2 through July 7 (3 trading days), total open interest increased each day and totaled 10,145 contracts. In short, this means that managed money is digging in and refusing to liquidate, therefore soybeans have a  way to go before it hits a bottom or temporary bottom. As this report is being compiled on July 8, August soybeans are trading 26.50 lower and November -8.50. Stand aside.”

Corn:

September corn lost 5.00 cents on volume of 250,508 contracts. Total open interest declined by 399 contracts, which is minuscule and dramatically below average. The July contract lost 2,019 of open interest, September – 1,527, December -1,031. Perhaps this is a sign that speculators, particularly managed money are getting blown out of the market because this is the first total open interest decline since July 1 when September corn lost 2 3/4 cents on volume of 283,657 contracts and total open interest declined by 7,035 contracts. In the month of July, there have only been two declines of open interest when corn prices have fallen. Like soybeans, managed money has been net long despite the collapse in prices, and like soybeans, we want to see managed money move to a net short position before a bottoming process can take place.

As this report is being compiled on July 11 after the release of the USDA report, September corn is trading 8.50 lower and has made a new contract low of 3.75 3/4. Corn remains on a short and intermediate term sell signal stand aside.

Wheat:

September wheat lost 2.75 cents on volume of 79,438 contracts. Volume increased from July 9 when September wheat lost 5.00 cents on volume of 70,522 contracts and total open interest increased by 1961 contracts. On July 10, total open interest increased by a massive 6401 contracts, which relative to volume is approximately 230% above average meaning that aggressive new short sellers were heavily entering wheat and driving prices to new contract lows (5.46 1/4). The July contract lost 86 of open interest. As this report is being compiled on July 11 after the release of USDA report, September Chicago wheat is trading 18.75 cents lower and has made a new contract low of 5.25. The September Kansas City contract is trading 14.25 cents lower, but has not penetrated its contract low of 6.08 3/4.

Live cattle:

August live cattle lost 2.65 cents on very heavy volume of 108,379 contracts. Volume slipped below that of July 9 when August cattle lost 2.725 cents on volume of 115,720 contracts and total open interest declined by 3,622 contracts. On July 10, total open interest declined by 2,081 contracts, which relative to volume is approximately 20% below average. The August contract accounted for loss of 11,705 of open interest. There were open interest increases in the October 2014 through August 2015 contracts. This had the effect of reducing total open interest to below average.

For the past 3 days beginning on July 8, total open interest has declined by 9,362 contracts while August cattle has fallen 6.80 cents. Collectively the 3 day decline of open interest relative to 3 day volume is approximately 20% above average, therefore cattle is undergoing healthy liquidation as prices fall. This is positive open interest action relative to the price decline, and precisely what we want to see in order to consider bullish positions. We are not advocating these as yet, but if we see a reduction in the net long position of manage money in today’s COT report, cattle may be positioned to move higher in the weeks ahead.

As this report is being compiled on July 11, August cattle is trading 80 points lower and has made a daily low of 1.46575, which is the lowest print since 1.46350 made on June 23. As we said in yesterday’s report, we think cattle will attempt to test its all-time high of 1.56475 made on July 7. The key area to watch for in the August contract is 1.45120, which is OIA’s pivot point for generating a short-term sell signal. If the high for the day is below that pivot point, cattle prices will continue to move lower. Stand aside.

WTI crude oil:

August WTI crude oil advanced 64 cents on heavy volume of 605,227 contracts. Volume was the heaviest since June 25 when August crude advanced 47 cents on volume of 617,233 contracts and total open interest increased by 15,698 contracts. On July 10, total open interest declined by 2,205 contracts, which relative to volume is approximately 80% less than average. The August contract lost 20,824 of open interest. The decline of total open interest is bearish.

Ever since generating a short-term sell signal on July 3, August crude has been extremely weak and has closed lower every day since June 26 with the exception of yesterday’s rally. Yesterday, August crude made a high of 103.00, and on July 11 has not been able to trade above it confirming the weakness. As this report is being compiled on July 11, August crude is trading $1.65 lower and has made a new low for the move at 100.57, which is the lowest print since $100.23 made on May 16. Unfortunately, because August crude has been on a one-way ride south, it never had a counter trend rally, which would have enabled clients to initiate bearish positions.

Natural gas:

August natural gas lost 5 cents on relatively heavy volume of 287,114 contracts. Volume was the heaviest since July 8 when August natural gas lost 2.1 cents on volume of 299,137 contracts and total open interest declined by 7,209 contracts. On July 10, total open interest increased by 5,802 contracts, which relative to volume is approximately 20% below average. However, the August contract lost 9,959 of open interest, which makes the total open interest increased more impressive (bearish). On July 10, August natural gas made a new low for the move at 4.108, which is the lowest print since January 21, 2014.We think natural gas may become one of our best future trades in 2014, however the market has much work to do on the downside in order to build a base from which a sustained rally can occur. As we have pointed out before, natural gas has a tendency to bottom in the July-August time frame.Natural gas remains on a short and intermediate term sell signal. Stand aside.

Euro:

September euro lost 43 pips on volume of 145,614 contracts. Total open interest increased by 665 contracts, which relative to volume is approximately 70% below average. As this report is being compiled on July 11, the euro is trading unchanged on the day. The September euro remains on a short term buy signal, but an intermediate term sell signal. Stand aside.

Swiss franc:

The September Swiss franc lost 24 pips on volume of 25,293 contracts. Total open interest declined by 420 contracts, which relative to volume is approximately 30% less than average. As this report is being compiled on July 11, the September Swiss franc is trading 1 pip higher on the day. Continue to hold the bullish September Swiss franc position and the bullish CHFEUR position. The exit point for the September Swiss franc trade is 1.1155 and for CHFEUR .8217.

Gold:

August gold advanced $14.90 on heavy volume of 219,060 contracts. Volume exceeded that of July 9 when August gold advanced 7.80 on volume of 214,930 contracts and total open interest increased by 4,051 contracts. On July 10, total open interest increased by 1,756 contracts, which relative to volume is approximately 55% below average. August gold made a new high for the move at 1346.80, which is the highest print since March 19 ($1359.00).We are extremely impressed with gold’s ability to trade firmly in the face of sharply declining grain prices and petroleum prices. Although we have no recommended position for gold, if long, exit bullish positions at the June 25 low of 1305.40. In the July 7 report, we recommended defensive measures and advise these be kept in place for now.

Silver:

September silver gained 44 cents on heavy volume of 60,739 contracts. Volume was the highest since June 27 when silver lost 2.8 cents on volume of 71,886 contracts and total open interest declined by 988 contracts.. On July 10, open interest increased by 1098 contracts, which relative to volume is approximately 25% below average. On July 10, September silver made a high of 21.63, which is the highest print since March 14 (21.79). As this report is being compiled on July 11, September silver is trading 3.5 cents lower on the day. Like gold, we have been very impressed with silver’s ability to trade firmly in the face of sharply declining petroleum and grain prices.In the July 7 report, we recommended defensive measures, and suggest these be kept in place for now