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Soybeans:

August soybeans gained 6.75 cents while the November contract advanced 15.75 on total volume of 165,862 contracts. Total open interest increased by a substantial 7,967 contracts, which relative to volume is approximately 75% above average meaning that aggressive new longs were heavily entering the market and driving prices higher. The August contract lost 778 of open interest. The August contract made a high of 12.03 1/2, which was above the July 15 high, but below the July 14 high of 12.11 1/2.The November contract made a high of 11.07 3/4, which was the highest print since 11.15 made on July 10.

As this report is being compiled on July 18, the August contract is trading 8.25 higher and has not taken out yesterday’s high while the November contract is trading 12..75 cents above yesterday’s close and has made a new high for the move at 11.18 3/4, which is slightly above the July 9 high of 11.17 1/2. The very substantial increase of open interest on July 16 is positive. Additionally, August soybean meal advanced $4.60 on volume of 75,615 contracts and total open interest increased by 2,665 contracts, which relative to volume is approximately 40% above average. In short, a rally in beans is certainly overdue. Despite this, speculators should continue to be on the sidelines.

The USDA reported sales of 37.66 thousand metric tons, which brings total commitments to date to 1.675.9 billion bushels versus USDA projections for the season of 1.620 billion bushels.

Corn:

September corn advanced 4.25 cents on volume of 253,121 contracts. Volume fell from July 15 when September corn lost 7.50 on volume of 283,367 contracts and total open interest increased by 7043 contracts. On July 16, total open interest declined by a massive 15,260 contracts, which relative to volume is off the charts heavy at 140% above average, meaning that longs and shorts were massively liquidating their positions as corn prices advanced. The September contract lost 6140 of open interest and December -12,855. The huge decline of open interest as corn prices advanced to 3.86 1/4, the highest print since July 11 (3.88 1/2) is bearish. As this report is being compiled on July 17, September corn made another new high at 3.87 3/4, but is trading unchanged on the day.In our view, the decline of open interest on July 16 is further evidence that longs who had previously refused to liquidate, took the opportunity to do so on yesterday’s rally. Corn needs to squeeze out speculative longs, and until this is accomplished, selling pressure will act to stem rallies.

From the July 13 Weekend Wrap:

“Remarkable as it is, from July 2 through July 8, which is the span of the COT report, September corn fell 17.75 cents, or -4.27% and yet managed money added 15,505 contracts to their long positions and only added 1,612 contracts to their short positions. It appears the corn market is a victim of bottom picking by an assortment of speculators, who think corn has to be close to a major low. From July 2 through July 8,total open interest increased every day and totaled 24,961 contracts further indicating that longs were not liquidating.”

“In summary, there is a large body of evidence that shows manage money is redefining the phrase “digging in” by refusing to liquidate despite sharply lower prices. Making this even more remarkable is the fact that September corn closed on Friday at levels last seen in August 2010. The contract low is in fact a multi-year low which makes the position of manage money all the more remarkable and untenable. Our view is that corn is far from a bottom and that a considerable amount of financial pain is in store for anyone long this market.”

The USDA reported sales of 573.7 thousand metric tons, which is the highest weekly sale since late April. This brings total commitments to 1.895.6 billion bushels versus USDA projections for the season of 1.900 billion bushels.

Wheat:

September Chicago wheat advanced 0.25 cents on light volume of 53,031 contracts.It appears that volume traded on July 16 was one of the lowest volume day of 2014. On July 16, total open interest increased by 4298 contracts, which relative to volume is approximately 230% above average, which is a huge number considering wheat closed essentially unchanged and the range on July 16 was only 9.00 cents. The open interest increase was solid across the board with September 2014 through December 2015 contracts gaining open interest. As this report is being compiled on July 17, Chicago wheat is trading sharply higher, up 18.25 cents on heavy volume. Chicago wheat remains on a short and intermediate term sell signal. Stand aside.

The USDA reported sales of wheat in all categories totaling 320.7 thousand metric tons bringing total commitments to date of 311.9  million bushels versus USDA projections for the season of 900 million bushels.

Live cattle:

August live cattle lost 90 points on volume of 59,283 contracts. Total open interest increased by 216 contracts, which relative to volume is approximately 85% below average. The August contract lost 3955 of open interest and open interest increases in the forward months brought down total open interest significantly. As this report is being compiled on July 17, August cattle is trading 2.650 cents higher on the day.Yesterday, August cattle closed at 1.47675 and opened at 1.49200 in the evening session, and this has been the low for the day. In short, there is a gap between 1.47675 and 1.49200, which we suspect will be filled during the next couple of days. For August cattle to have a sustained move higher, the low of the day in the August contract must be above 1.51320.Continue to stand aside.

WTI crude oil:

August WTI crude oil advanced $1.24 on fairly heavy volume of 643,092 contracts. Volume shrank dramatically from July 15 when August WTI crude oil lost 95 cents on volume of 839,302 contracts and total open interest declined by just 2,431 contracts. On July 16, total open interest declined by 13,005 contracts, which relative to volume is approximately 20% below average. The August contract accounted for loss of 13,234 of open interest, which means there was insufficient open interest increases in the forward months to offset the decline in the August contract.

As we pointed out in yesterday’s report, from July 3 through July 15 when the August contract lost $4.10, total open interest declined by 28,247 contracts. Yet on July 16 when August crude oil rallied 1.24, open interest declined by 13,005 contracts. This supports our view that longs have refused to liquidate and are using rallies to reduce losses or increase profits.As this report is being compiled on July 17, August WTI crude oil is trading $1.70 higher while the September Brent contract is trading only 57 cents above yesterday’s close.

In yesterday’s report, we said we wanted to wait another day before making a recommendation about bearish positions. Our concern on July 17 is that the market is rallying strongly on very heavy volume. We prefer to wait until tomorrow rather than act prematurely. If the low of the day on Friday’s trading is above 102.39, an intermediate term buy signal would be generated, but a short-term buy signal would not. If this is a bear market rally, August WTI should run into trouble between 103.19 and 103.67. Continue to stand aside.

From the July 15 report:

“From July 3 when August WTI crude oil generated a short-term sell signal through July 15, the August contract lost $4.10, and made a low (99.01), which was 5.05 lower than the July 3 close. During this time, total open interest declined only 28,247 contracts.The minor open interest decline from July 3 through July 15 is indicative of longs who refuse to liquidate, and the latest COT report confirms this.As this report is being compiled on July 16, August WTI is trading $1.19 higher and has made a high of 101.39, which is slightly above yesterday’s high of 101.06 and the July 14 high of 101.19.”

Natural gas:

August natural gas advanced 2.2 cents on volume of 151,463 contracts. Total open interest increased by 1665 contracts, which relative to volume is approximately 45% below average. The August contract lost 6,268 of open interest. As this report is being compiled, August natural gas has fallen sharply, down 17.9 cents on fairly heavy volume and has made a new low for the move at $3.939. Natural gas will continue to squeeze longs out of the market, which we believe will set the stage for a rally later on in 2014. Continue to stand aside. August natural gas generated a short and intermediate term sell signal on June 27.

The Energy Information Administration announced that working gas in storage was 2,129 Bcf as of Friday, July 11, 2014, according to EIA estimates. This represents a net increase of 107 Bcf from the previous week. Stocks were 608 Bcf less than last year at this time and 727 Bcf below the 5-year average of 2,856 Bcf. In the East Region, stocks were 338 Bcf below the 5-year average following net injections of 65 Bcf. Stocks in the Producing Region were 303 Bcf below the 5-year average of 1,030 Bcf after a net injection of 29 Bcf. Stocks in the West Region were 86 Bcf below the 5-year average after a net addition of 13 Bcf. At 2,129 Bcf, total working gas is below the 5-year historical range.

Euro: On July 16, the September euro generated a short-term sell signal, and remains on an intermediate term sell signal.

The September euro lost 45 pips on volume of 133,616 contracts.Total open interest increased by a massive 5778 contracts, which relative to volume is approximately 55% above average, meaning that new short sellers were aggressively entering the market and driving prices to new lows for the move (1.3523). As this report is being compiled on July 17, the September euro is trading unchanged on the day. Stand aside.

Swiss franc: On July 16, the September Swiss franc generated a short-term sell signal and remains on an intermediate term sell signal.

The September Swiss franc lost 35 pips on volume of 31,670 contracts. Total open interest increased by 126 contracts, which relative to volume is approximately 75% below average. As this report is being compiled on July 17, the September Swiss franc is trading 9 pips higher on the day. Stand aside.

Dollar index: On July 16, the September dollar index generated a short and intermediate term buy signal.

Gold:

August gold advanced $2.70 on volume of 147,394 contracts. Total open interest declined by 4496 contracts, which relative to volume is approximately 20% above average. As this report is being compiled on July 17, August gold is trading us $16.50 higher on geopolitical concerns and has made a daily high of 1325.90, which is the highest print since July 14 (1340.90).We advise against chasing this rally. Stand aside.

Silver:

September silver lost 11.4 cents on volume of 37,401 contracts. Total open interest increased by 715 contracts, which relative to volume is approximately 20% below average. As this report is being compiled on July 17, September silver is trading 33.2 cents higher on the day and has made a daily high of $21.30, which is the highest print since 21.53 made on July 14.. Like gold, we would not chase this rally and recommend a sideline stance.