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Soybeans:

August soybeans lost 12.50 cents while the November contract declined by 8.00 cents on total volume of 193,025 contracts. Volume increased from July 16 when 165,862 contracts were traded and August soybeans advanced 6.75 while the November contract gained 15.75 cents and total open interest increased by 7,967 contracts. On July 17, total open interest increased by 5,205 contracts, which relative to volume is average.The August contract lost 2,824 of open interest and the September 2014 through November 2015 contracts all gained open interest.

As this report is being compiled on July 18, August soybeans are trading 5.50 higher and have made a high of 11.84 3/4, which is significantly below yesterday’s high of 12.00. The November contract is trading 2.00 cents higher and has made a daily high of 11.01, which is significantly below yesterday’s high of 11.18 3/4. Soybeans are displaying an immense amount of weakness, and as we have discussed in previous reports, rallies fade because of new short sellers and speculative longs who acquired positions at higher prices. Soybeans remain on a short and intermediate term sell signal. Stand aside.

From the July 14 report:

“The point we made in the July 7 report continues to have validity: The market must shed speculative longs in order to relieve selling pressure.Although soybeans are massively oversold and due for a rally, what applies in equities on the upside also applies to soybeans on the downside: The market can and will have moves for a longer duration than anyone thinks possible.We continue to advise a stand aside posture. August and November soybeans remain on a short and intermediate term sell signal.”

From the July 7 report:

“Due to the relatively heavy long position of managed money in soybeans, soybean meal, soybean oil, corn and Kansas City wheat, rallies will not get far because those with losses will be looking to sell positions as the market rallies. This will cap advances.”

Corn:

September corn gained 1.25 cents on volume of 239,197 contracts. Total open interest increased by 4,325 contracts, which relative to volume is approximately 25% below average.The September 2014 through July 2014 contracts all gained open interest. As this report is being compiled on July 18, September corn is trading 3.75 cents lower and currently trading on the lows. On July 17, corn made a high of 3.87 3/4, but sold off to close fractionally higher. This was the highest price for the September contract since July 11 (3.88 1/2).Like soybeans, corn must shed its speculative longs before a bottom can be made. Additionally, we want to see managed money move to a net short position. Stand aside.

Chicago wheat:

September Chicago wheat gained 12.75 cents on very heavy volume of 140,124 contracts.Volume was the highest since June 13 when July Chicago wheat advanced 0.75 cents on volume of 157,435 contracts and total open interest declined by 3,240 contracts. Interestingly, volume on July 16 of 53,031 contracts was one of the lowest volume days of 2014 and volume on July 17 was the highest volume day in over one month. On July 17, total open interest declined by 1,606 contracts, which relative to volume is approximately 45% below average. The September contract accounted for loss of 3,048 of open interest. Much of the rally in wheat has been attributed to the downing of the Malaysian aircraft in Ukraine, however both longs and shorts used the rally as an opportunity to head for the exit.  As this report is being compiled on July 18, September Chicago wheat is trading 16.75  cents lower on the day and is at low of the day. A test of the July 14 low of 5.24 1/4 seems inevitable. September Chicago wheat remains on a short and intermediate term sell signal. Stand aside.

Live cattle:

August live cattle advanced nearly the daily limit, up 2.975 cents on volume of 65,666 contracts.Volume was the highest since July 14 when August cattle lost 1.325 cents and total open interest declined by 597 contracts. On July 17, total open interest declined by 1,506 contracts, which relative to volume is approximately 10% below average. The August contract lost 6,461 of open interest and there was insufficient open interest increases in the forward months to offset the decline in the August contract. We view this as bearish, and though the market may continue to rally, we do not feel comfortable recommending bullish positions .We find it telling that volume on the July 17 advance was considerably less than the volume on the July 14 when cattle declined. Stand aside.

WTI crude oil:

August WTI crude oil advanced $1.99 on huge volume of 1,135,765 contracts.Volume traded on July 17 was the highest of 2014 and took out the previous high for the year of 1,082,134 contracts made on March 12 when August WTI crude oil closed at 95.78. On July 17, total open interest declined by a substantial 24,414 contracts, which relative to volume is approximately 20% below average, but the number itself is the largest we have seen in at least 2 months.The August contract accounted for loss of 40,352 of open interest.

When price and open interest of July 16 and July 17 are added together, a clear bearish picture emerges. During those 2 days, August WTI crude oil advanced $3.23 and total open interest declined by 37,419 contracts. This indicates the sell signals generated on July 3 and July 11 respectively have been confirmed by abysmal open interest action on the price advance.We have switched over to the September contract, and the high for July 18 has been 102.98,which is slightly above 102.91, the high made on July 17 and is the highest print since 102.90 made on July 9.

September crude oil made its high in the early evening session on July 17 and has been trading lower ever since. The lack of significant follow-through from yesterday’s advance reveals the internal weakness of crude oil. As this report is being compiled on July 18, September WTI crude oil is trading 24 cents lower on the day.

It appears likely the September contract will generate an intermediate term buy signal on July 18, but will not generate a short-term sell signal. Additionally, we do not usually advise clients to take positions on Friday because anything can happen over the weekend. Although it appears that a tradable high in the September contract has been made on July 18, we think it is best to wait until Monday..We are reprinting the comments from yesterday’s report to emphasize the point that there were large numbers of speculative longs waiting for a rally to liquidate to reduce losses, or increase profits.

From the July 16 report:

“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.”

Natural gas:

August natural gas lost 16.5 cents on heavy volume of 416,876 contracts.Volume was the heaviest since June 12 when July natural gas advanced by 25.4 cents on volume of 533,085 contracts and total open interest increased by 21,609 contracts. On July 17, total open interest declined by 6,716 contracts, which relative to volume is approximately 30% below average. The August contract accounted for loss of 13,321 of open interest.As this report is being compiled on July 18, August natural gas is trading 1.00 cent lower and has taken out yesterday’s low by a fraction to 3.934, which is the lowest print for natural gas on the continuation chart since December 2, 2013.

From the July 16 report:

“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.”

Gold:

August gold advanced $17.10 on heavy volume of 195,515 contracts. Volume was the heaviest since July 15 when gold lost $9.60 on volume of 203,408 contracts and total open interest declined by 980 contracts. On July 17, total open interest increased by a hefty 4,790 contracts, which relative to volume is average.The reason for the rally according to various press accounts was the downing of the Malaysian aircraft over Ukraine, and new longs were jumping in with both feet as the market made a high of $1325.90 on July 17, which was the highest print since July 14 (1340.90). As this report is being compiled on July 18, August gold is trading $5.50 lower and has made a daily low of 1305.00, which has not taken out the July 17 low of 1298.10.In yesterday’s report, we recommended against chasing the rally, and continue to advise a stand aside posture.

Silver:

September silver gained 35.9 cents on volume of 52,016 contracts. Volume was the highest since July 15 when September silver lost 2.5 cents on volume of 56,480 contracts and total open interest increased by 358 contracts. On July 17, total open interest increased by a substantial 1,590 contracts, which relative to volume is approximately 20% above average meaning that new longs were rushing into the market and moving it to a high of $21.30, which is the highest print since 21.53 made on July 14. As this report is being compiled on July 18, September silver is trading 18.2 cents lower and has made a daily low of 20.78 and a high of 21.315, which was made in the early evening session of July 17.Like gold, we advised clients against chasing silver in the July 16 report and continue to advocate a stand aside posture.