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Soybeans:

August soybeans advanced 2.00 cents while the November contract lost 8.75 cents on low total volume of 121,176 contracts.Volume was the lowest since May 30 when 104,984 contracts were traded and August soybeans closed at 14.24 1/2. On July 18, total open interest increased by 4,012 contracts, which relative to volume is approximately 30% above average meaning that new short sellers were aggressively entering the market and driving prices lower for the November contract. There were open interest increases in September 2014 through November 2015 contracts.

As this report is being compiled on July 21, August soybeans are trading 4.75 lower while the November contract -18.75 and has made a low of 10.65 1/2, which is slightly above the low made on July 11 after the release of the USDA report. The prospects look increasingly positive for the soybean crop even though we have yet to enter the critical growing season in August. Additionally, according to the recent COT report, managed money remains long soybeans by a ratio of 1.47:1, which is down slightly from the ratio of 2 weeks ago of 1.76:1. In short more liquidation is in store, and we have been warning about this since July 7 -8.

From the July 13 Weekend Wrap:

“When evaluating the possibility of a bottom, or temporary bottom in the grains, the focus should be less on price than the imbalance of supply and demand for futures contracts.”

“Beginning on July 8, we placed the above sentence in each report to remind clients that the focus should not be on price, but rather the imbalance of supply and demand for futures contracts. The reason; this is going to be the primary driver of prices until the distorted position of managed money aligns itself with market conditions. Once this occurs, prices should begin to stabilize.”

Corn:

September corn lost 8.25 cents on light volume of 184,591 contracts. Volume was the lightest since July 3 when 118,059 contracts were traded and September corn closed at $4.09 1/2.On July 18, total open interest increased by a massive 9,667 contracts, which relative to volume is approximately 110% above average meaning that new short sellers were aggressively and heavily entering the market and driving prices to a new contract low (3.70 3/4). The September 2014 through July 2016 contracts all gained open interest. The bearishness has continued on July 21 as September corn is trading 8.25 cents lower and has made another new contract low at 3.63.

From the July 13 Weekend Wrap:

“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.”

Chicago wheat:

September Chicago wheat lost 18.50 cents on volume of 81,648 contracts. Total open interest increased by a massive 6,357 contracts, which relative to volume is approximately 210% above average meaning that new aggressive short sellers were heavily entering the market and driving prices to the daily low of 5.31. The September 2014 through September 2015 contracts all gained open interest. As this report is being compiled on July 21, September Chicago wheat is trading 5.50 lower, and has made a new contract low at 5.23 3/4, which takes out the July 11 low of 5.25 made on the release of USDA report.

We are watching the wheat-corn spread, and it made its recent low at $1.44 on June 24, and this area has shown to be supportive going back to February 27 when the spread closed at 1.45 1/2. The most recent high was made on May 7 when the spread closed at $2.35 1/2.Despite the sharp move lower in Chicago wheat, the spread continues to trade in the $1.60 area. After harvest pressures abate, we expect to see the spread widened out.

Live cattle:

August live cattle gained 97.5 points on volume of 58,228 contracts. Total open interest declined by 731 contracts, which relative to volume is approximately 45% below average. The August contract lost 4,049 of open interest. As this report is being compiled on July 21, August cattle is trading 1.10 cents higher and has made a daily high of 1.53000. Although it appears cattle is about to challenge its contract high of 1.56475 made on July 7, total open interest action is very negative, and as a consequence we are unable to recommend bullish positions.

WTI crude oil:

September WTI crude oil lost 25 cents on substantial volume of 660,072 contracts. Total open interest declined only 4,268 contracts, which relative to volume is approximately 55% below average. The August contract accounted for loss of 18,898 of open interest. As this report is being compiled On July 21, September WTI crude oil is trading 30 cents higher and has made a daily high of 102.78, which is below the high of July 18 of 102.98, and the high of 102.91 made on July 17 when September WTI advanced 1.60 on total volume of 1,135,765 contracts and total open interest declined by 24,414 contracts.In short, after the big move on July 17, there has been no follow through on the upside and subsequently have seen 2 days with lower highs.We will wait one more day before deciding whether or not to make a recommendation for bearish positions.

From the July 20 Weekend Wrap: 

On July 3, August and September WTI generated a short-term sell signal and on July 11 generated an intermediate term sell signal. The short-term sell signal has not reversed and for this to occur September WTI must trade above 2 of OIA’s key pivot points: $102.34 and 103.82.The real battle for September crude will be to break above the pivot point range. If it is unable to accomplish this and open interest continues to act bearishly, we think the market will turn lower once again and the intermediate term buy signal generated on July 18 will be reversed. Stand aside.

Natural gas:

August natural gas lost 3 ticks on total volume of 163,733 contracts. Total open interest declined by only 8 contracts, but the August contract lost 6221 of open interest. As this report is being compiled on July 21, August natural gas is trading 11.2 cents lower and has made another new low at 3.827. The August contract has not made a new contract low and for this to occur the market would have to trade below 3.593. The September contract would need to trade below 3.355. Sliding natural gas prices have been nothing short of catastrophic for anyone long, and the low on July 21 is the lowest price for natural gas on the continuation chart since the week of November 25, 2013.

Remarkably, the latest COT report revealed that managed money remains long natural gas by a ratio of 1.15:1, which is about the same as the previous week of 1.14:1. Ideally, we want to see managed money move to a net short position, which we think will coincide with a seasonal low. Natural gas has closed lower for 6 consecutive weeks, and it is within a week or 2 of making a seasonal low. Last year, natural gas made its seasonal low the week of August 5. On June 27, August natural gas generated a short and intermediate term sell signal. Stand aside.

Copper:

September copper lost 3.60 cents on volume of 50,619 contracts. Total open interest declined by 3,420 contracts, which relative to volume is approximately 160% above average meaning that liquidation was extremely heavy on the decline. In the July 20 Weekend Wrap, we wrote about the massive build of open interest on the price decline, and the action on July 18 is the first indication that market participants are heading for the exit.

From the July 20 Weekend Wrap:

“OIA protocols indicate that a short-term sell signal is imminent, and for this to change, September copper must make a daily low above OIA’s key pivot point of 3.2394. Unless this occurs, the market will trade sideways to lower. On June 23, OIA announced that September copper generated a short and intermediate term buy signal.If currently long, we recommend lightening up on positions and, having sell stops in place (actual or mental).”

Gold:

August gold lost $7.50 on volume of 144,361 contracts. Total open interest declined by 4,330 contracts, which relative to volume is approximately 20% above average. From July 14 through July 18, total open interest has declined by 8,861 contracts while August gold has lost $28.00. This is positive open interest action relative to the price decline. However, as we pointed out in the July 20 weekend report, we think there is more liquidation ahead due to the significant open interest build from June 20.Also, it appears that managed money is not willing to dig in on gold because the net long position changed fairly significantly in the most recent COT report. For example, the long to short ratio stood at 5.49:1, which is down dramatically from the previous week of 7.39:1, and is the lowest since June 24 (3.88:1). This is not to say that we are bearish on gold, only that it appears to have more backing and filling to do before prospective market participants feel confident enough to enter the market in larger numbers.

From the July 20 Weekend Wrap:

“From June 20 (which was the day after the major move in gold + 41.40) through July 17, total open interest increased 21,879 contracts, however, August gold advanced only 30 cents in this time frame. This is bearish open interest action relative to the unchanged price from June 20 through July 17.In other words, the substantial increase of open interest was not moving prices higher. We think this spells potential trouble for gold and is vulnerable to further downside because speculators who acquired gold at higher prices will be forced to liquidate as prices move lower.In order for August gold to continue its advance, the daily low must be above OIA’s key pivot point of 1327.00. August gold remains on a short and intermediate term buy signal. Stand aside.”

Silver:

September silver lost 24.8 cents on light volume of 36,154 contracts. Total open interest declined by 1,410 contracts, which relative to volume is approximately 55% above average meaning that market participants were liquidating fairly heavily on the decline. As this report is being compiled on July 21, September silver is trading 10.2 cents higher on the day. Silver remains on a short and intermediate term buy signal. At this juncture, we have no recommendation.