Soybeans:

August soybeans lost 13.00 cents while new crop November lost 6.00 cents on total volume of 159,319 contracts. Volume shrank dramatically from July 1 when August soybeans lost 2.00 cents while the November contract was -9.75 on volume of 240,693 contracts while total open interest declined by 1,257 contracts. On July 2, total open interest increased by 1,192 contracts, which relative to volume is approximately 65% below average. However, the July contract lost 2556 of open interest, August -179, November -3537, which makes the total open interest increased more impressive (bearish). From June 25 through July 2, total open interest has declined by 10,748 contracts while the August contract declined 43.00 cents or 3.17% and the November contract lost 83.00 cents or 6.78%. During this time, there have been only 2 days when total open interest increased. In short, the main driver of prices during the past several days has been liquidation, not aggressive new short sellers as prices moved lower..

We know that managed money is long by a ratio of 1.90:1 based upon last week’s COT report and we suspect that most of the liquidation was speculative in nature. On July 1, August soybeans made their low for the move of 13.05 and the November contract’s low was 11.32. As this report is being compiled on July 3, August soybeans are trading 13.50 lower and November -5.50. The August contract has made a new low for the move of 12.97 1/4 while the November contract has not breached the low made on July 1. The path of least resistance is lower and it appears that managed money has to get net short, before we get a bounce of any magnitude. Although both August and November soybeans remain on a short and intermediate term sell signal, we recommend a stand aside posture. The growing season is a long way from being over, and we expect at least one major weather scare..

The USDA reported soybean sales of 40.6 thousand metric tons ringing total commitments season to date of 1.672.4 billion bushels versus USDA projections for the season of 1.600 billion bushels.

Soybean meal: On June 11, July and August soybean meal generated a short-term sell signal and on July 1 August soybean meal generated an intermediate term sell signal. Until we see a trading opportunity or a change of signal, we are suspending reporting on soybean meal. 

August soybean meal lost $3.30 on volume of 74,618 contracts. Volume shrank from the 104,997 contracts traded on July 1 when August soybean meal lost 70 cents and open interest increased by a massive 6786 contracts. On July 2, total open interest declined by 1864 contracts, which relative to volume is average.The July contract lost 540 of open interest and August – 3132. As this report is being compiled on July 3, August soybean meal is trading $8.70 lower, down 2.04% versus August soybeans, which are trading 1.08% lower. Similar to soybeans, the main driver for the past several days has been open interest declines, and according to last week’s COT report, managed money remains long soybean meal by ratio of 3.26:1. This means that liquidation has to run its course and that managed money needs to get net short, before a bottom is likely to occur.

The USDA reported sales of 82.84 thousand metric tons bringing total sales season to date of 9813.44 thousand metric tons versus USDA projections for the season of 10,433 thousand metric tons.

Corn:

September corn lost 3.75 cents on volume of 175,665 contracts. Volume shrank dramatically from July 1 when 283,657 contracts were traded and September corn lost 2.75 cents while total open interest declined by 7,035 contracts. On July 2, total open interest increased by 5189 contracts, which relative to volume is approximately 20% above average meaning that new short sellers were in control and driving prices lower. As this report is being compiled on July 3, September corn has made another contract low of 4.09 and is trading 3.00 cents lower. September corn remains on a short and intermediate term sell signal. Stand aside.

The USDA reported corn sales of 290.7 thousand metric tons bringing total commitments season to date of 1.858.7 billion bushels versus USDA projections for the season of 1.900 billion bushels.

Chicago wheat:

September Chicago wheat lost 3.00 cents on volume of 61,659 contracts. Total open interest increased by 4731 contracts, which relative to volume is approximately 210% above average meaning that new short sellers were entering the market and driving prices lower. The July contract lost 626 of open interest, which makes the total open interest increase more impressive (bearish). The low in September Chicago wheat occurred on June 30 at $5.67 1/2, which is 2 cents above the contract low of 5.65 1/2 and surprisingly, this low has not been violated yet. As this report is being compiled on July 3, September Chicago wheat is trading 4.00 cents higher and has made a daily low of 5.72. Interestingly, September Chicago wheat has been outperforming September Kansas City wheat having lost 8.75 cents or -1.50% versus KC wheat of -31.75 cents or -4.45% from June 25- July 2. According to last week’s COT report, managed money was short Chicago wheat by ratio of 1.57:1 and we have no doubt that this will increase in the upcoming COT report. However, managed money was long by 2.57:1 in KC wheat. The under performance of KC wheat may be attributed to the liquidation of a significant long position held by managed money. Stand aside.

The USDA reported wheat sales in all categories of 567.5 thousand metric tons bringing total commitments season to date of 287.7 million bushels versus the USDA projection for the season of 925 million bushels.

Live cattle:

August live cattle gained 82.5 points on volume of 74,446 contracts. Total open interest declined by 2968 contracts, which relative to volume is approximately 55% above average meaning that liquidation was fairly heavy on the advance. The August contract lost 5351 of open interest and there was not sufficient open interest increases in the forward months to offset the decline in the August contract. As this report is being compiled on July 3, August cattle is trading up the 3.00 cent limit. The market has gone parabolic and where it stops is anyone’s guess. Do not enter new long positions at current levels. August cattle remains on a short and intermediate term buy signal. Stand aside.

WTI crude oil: August WTI crude oil will generate a short-term sell signal on July 3. However, it remains on an intermediate term buy signal.

August WTI crude oil lost 86 cents on volume of 534,968 contracts. Volume was the highest since June 25 when August WTI advanced 47 cents on volume of 617,233 contracts while total open interest increased by 15,698 contracts. On July 2, total open interest declined by 3466 contracts, which relative to volume is approximately 65% less than average. The August contract accounted for loss of 14,071 of open interest. As this report is being compiled on July 3, August WTI is trading 51 cents lower and has made a daily low of 103.67, which is the lowest print since 103.59 made on June 12. As we stated in the June 30 report, if August WTI significantly violated the low of 104.66 there could be a test of the 50 day moving average of 102.24. Today’s high of 104.29 in the August contract left a small gap from the July 2 closing price of 104.48..

From the July 1 report:

“The August contract accounted for loss of 7,598 of open interest, which makes the total open interest increased more impressive (bearish). As this report is being compiled on July 2, August WTI is trading 87 cents lower while the Brent contract is trading – $1.01.Even with the decline in stocks per today’s EIA report, the market is trading lower. If August crude closes below OIA’s key pivot point of 104.42, it is highly likely that a short-term sell signal will be generated during the following day(s). Continue to stand aside.”

Natural gas:

August natural gas lost 9.8 cents on volume of 203,379 contracts. Total open interest increased by 3560 contracts, which relative to volume is approximately 25% below average. The August contract gained 1452 of open interest, and it is unusual for the front month to gain open interest on a price decline. This means that market participants are getting increasingly bearish as natural gas prices trade at the very low end of their trading range going back for the past 4 months.Do not enter new bearish positions at current levels. There is a seasonal tendency for natural gas prices to bottom in July. August natural gas remains on a short and intermediate term sell signal.

The Energy Information Administration announced that working gas in storage was 1,929 Bcf as of Friday, June 27, 2014, according to EIA estimates. This represents a net increase of 100 Bcf from the previous week. Stocks were 666 Bcf less than last year at this time and 790 Bcf below the 5-year average of 2,719 Bcf. In the East Region, stocks were 366 Bcf below the 5-year average following net injections of 65 Bcf. Stocks in the Producing Region were 329 Bcf below the 5-year average of 1,004 Bcf after a net injection of 19 Bcf. Stocks in the West Region were 96 Bcf below the 5-year average after a net addition of 16 Bcf. At 1,929 Bcf, total working gas is below the 5-year historical range.

Euro:

The September euro lost 25 pips on light pre-holiday volume of 106,557 contracts. Total open interest declined by 1562 contracts, which relative to volume is approximately 40% below average. As this report is being compiled, the euro is trading 45 pips lower and has made a daily low of 1.3599. On July 1, the September euro generated a short-term buy signal and has remained on an intermediate term sell signal. Typically, after the generation of a buy signal, the market has a tendency to pullback for 1-3 days. Usually, this would be the opportunity to initiate bullish positions, however we much prefer the long side of the September Swiss franc to the euro.Additionally, it is possible that the short term buy signal generated on July 1 was false and this could reverse early next week. If the high of the day is below OIA’s key pivot point of 1.3613, a short-term sell signal will be generated. However, if the short term buy signal is to stay intact, the market should not move much below 1.3575. We continue to advise a stand aside posture.

Swiss franc:

The September Swiss franc lost 23 pips on volume of 28,352 contracts. Total open interest increased by 773 contracts, which relative to volume is average. As this report is being compiled, the September Swiss franc is trading 55 pips lower and has made a new low for the move at 1.1155, which is the lowest print since 1.1150 made on June 20. On June 27, the Swiss franc generated a short-term buy signal, and remains on an intermediate term sell signal. We think the chances of the sell signal reversing in the Swiss franc is far less than the euro. However, if this to occur, the daily high must be below 1.1175.

Australian dollar:

The September Australian dollar lost 57 pips on volume of 72,705 contracts. Total open interest declined by 3,305 contracts, which relative to volume is approximately 75% above average meaning that liquidation was heavy on the decline. As this report is being compiled on July 3, the Australian dollar has taken another dive trading 68 pips lower and has made a new low for the move at 92.70, which is significantly below the high made on July 1 of 94.54, which was the highest print since 94.37 made by the June contract on June 9, 2014. On April 7, 2014, the June Australian dollar made a high of 94.19, and the previous high was made on November 18, 2013 when the December 2013 Australian dollar made a high of 94.32. Market participants who bought into the latest rally are getting hit hard by losses if they refuse to liquidate. We have been advising a stand aside posture in the Australian dollar.

Copper:

September copper gained 6.10 cents on volume of 59,809 contracts. Volume was the heaviest since June 26 when September copper advanced 60 points on volume of 78,903 contracts and total open interest declined by 1892 contracts. On July 2, total open interest increased by a massive 7,895 contracts, which relative to volume is approximately 390% above average meaning that huge numbers of new longs were aggressively entering the market and driving prices to new highs for the move (3.2665), which is the highest print since $3.2855 made on the copper continuation chart on February 25, 2014.

Since June 13, when the rally began, copper has advanced every day with the exception of June 18, 26, 27. On June 23, copper generated a short and intermediate term buy signal. However as we have reported before, we do not see a key driver for the increase in copper prices and the rapid advance without a major correction causes us to recommend a stand aside posture.In last week’s COT report, managed money was long copper by ratio of 1.70:1, which is up from the previous week’s ratio of 1.01:1. We have no doubt that this week’s report will show a significant increase in the ratio.

Gold:

August gold advanced $4.30 on light volume of 125,240 contracts. Total open interest increased by 4745 contracts, which relative to volume is approximately 50% above average meaning that new market participants continue to enter the market as gold advances. From June 27 through July 2, gold has advanced every day and this has been accompanied by increases of open interest each day. This is very positive. The net long position of manage money will probably increase substantially when the current COT report is released. On June 20, August gold generated a short and intermediate term buy signal. We much prefer silver to gold, or platinum.

Platinum:

October platinum lost $3.50 on healthy volume of 16,917 contracts. Total open interest increased again, this time by 1,295 contracts, which relative to volume is a heavy 210% above average.Like gold, market participants are piling into platinum, and yesterday prices reached their highest level since the week of September 2, 2013. Last week’s COT report revealed that managed money was long platinum by a ratio of 15.00:1 compared to gold of 3.88:1. The heavy long position of managed money makes platinum vulnerable to a major correction. We recommend a stand aside posture.

Silver:

September silver gained 18.5 cents on volume of 45,066 contracts. Total open interest increased by 2518 contracts, which relative to volume is approximately 120% above average. September silver made a new high for the move at $21.335, which is the highest print since March 17 of 21.425. On June 13, silver generated a short-term buy signal and on June 16 we recommended the initiation of bullish positions. These are highly profitable and the short-term buy signal was confirmed by the intermediate term buy signal on June 20. We have been warning of a correction, but the market has had shallow pullbacks accompanied by strong rebounds. As this report is being compiled on July 3, September silver is trading 17.5 cents lower and has made a daily low of 20.820, which is above the June 30 low of 20.805 and the June 25 low of 20.76. We recommended using the June 25 low as an exit point for bullish positions. Until this occurs, continue to hold bullish positions.