Bloomberg Access:{OIAR<GO>}

Soybeans:

August soybeans lost 26.00 cents On volume of 303,015 contracts. Volume increased substantially from July 21 when the August contract gained 5.50 cents on volume of 185,747 contracts and total open interest declined by 7,248, a bearish reading. Additionally, volume exceeded that of July 20 when the August contract lost 17.00 cents on volume of 238,690 contracts and total open interest declined by 310. Volume on July 22 exceeded that of July 19 when the August contract lost 34.25 cents on volume of 269,463 contracts and total open interest increased by 642, a bearish reading.

On July 22, total open interest declined by a massive 38,755 contracts, which relative to volume is approximately 425% above average meaning liquidation was off the charts heavy. The August contract accounted for a loss of 30,191. Last week, we discussed the heavy net long position of managed money and that this class of trader had not liquidated their positions.

Friday was the first day that indicated panic selling. According to the latest the COT report managed money liquidated 7,637 of their long positions and added 7,900 to their short positions. Commercial interests added 11,312 to their long positions and liquidated 900 contracts of their long positions. As of the latest report, managed money remains long soybeans by ratio of 5.09:1, though this is down from the previous week up 7.52:1 and the ratio two weeks ago of 8.19:1.

As this report is being compiled on July 25, the August contract is trading 17.75 cents lower and has made a daily low of 9.86 1/4, which is above Friday’s low for the move of 9.85. At this juncture, a rally is overdue, but as the current ratio indicates there remains large numbers of speculative longs who are undoubtedly showing substantial losses. Since the COT report tabulation date of July 19, through July 22 total open interest has declined by 46,313 contracts, which means that next week’s net long position will likely be substantially reduced.

On July 6, OIA announced that August, September and November soybeans generated short term sell signals and intermediate term sell signals on July 20. For speculative accounts, do not enter bearish positions at current levels because the market could rally at any time.

Corn:

September corn gained 0.75 cents on volume of 311,142 contracts. Total open interest declined by 6,475 contracts, which relative to volume is approximately 20% below average. The September contract accounted for a loss of 10,526 of open interest. The COT report released last Friday showed that managed money liquidated 4,622 of their long positions and added 19,250 contracts to their short positions. Commercial interests liquidated 11,215 of their long positions and also liquidated 28,139 of their short positions. As this report is being compiled on July 25 the September contract trading 3.25 cents lower but has not taken out yesterday’s Friday’s contract low of 3.26 3/4. We have no recommendation.

WTI crude oil:

September WTI crude oil lost 49 cents on volume of 628,952 contracts. Total open interest declined by 1,179 contracts, which is substantially below average. The August contract lost 829 of open interest. As this report is being compiled on July 25, the September contract is trading sharply lower, down $1.08 or -2.44% and has made a new low for the move of 42.97, which is the lowest print since 42.50 made April 26.

The COT report revealed that managed money added 5,657 to their long positions and also added 24,100 to their short positions. Commercial interests liquidated 26,629 of their long positions and also liquidated 31,031 of their short positions. As of the latest report, managed money is long WTI crude oil by a ratio of 1.89:1, down from the previous week of 2.20:1 and the ratio two weeks ago of 2.10:1.

On June 16, OIA announced that September WTI crude oil generated a short term sell signal and an intermediate term sell signal on July 8. Continue to hold the short call positions recommended in the June 20 report.

Gold:

August gold lost $8.90 on substantial volume of 308,402 contracts. Total open interest declined by 10,132 contracts, which relative to volume is approximately 15% above average. Accounting for the total open interest decline was a substantial loss in the August contract of 43,440 contracts as it approaches first notice day in the next week. The COT report released last Friday show that managed money liquidated 8,789 of their long positions and also liquidated 2,057 of their short positions. Commercial interests liquidated 3,349 of their long positions and also liquidated 9,229 of their short positions. As of the latest report, managed money is long gold by a ratio of 8.22:1, up slightly from the previous week of 8.01:1, but down substantially from the ratio two weeks ago of 11.12:1. 

As this report is being compiled on July 25, the August contract is trading $3.90 lower and has made a daily low of 1311.10, which is slightly above the July 21 print of 1310.70. Remarkably, though gold is down from its contract high of 1377.50 made on July 6, it has NOT generated a short term sell signal. For this to occur the daily high must be below OIA’s key pivot point for July 25 of $1322.50. We continue to recommend a stand aside posture.

10 Year Treasury note:

The September 10 year treasury note will generate a short term sell signal on July 25, but remains on an intermediate term buy signal. Keep in mind the Federal Reserve is holding meetings on Tuesday and Wednesday of this week and will announce the results of the meeting Wednesday at 2:00 Eastern daylight time. No interest rate hike is on the table for this month, but the stance may become more hawkish with a hint of an interest rate increase in future months.

Dollar index:

The September dollar index advanced by a strong 47 points on volume of 19,415 contracts. Total open interest exploded higher, up by 1,195 contracts, which relative to volume is approximately 140% above average meaning aggressive new buyers were entering the market in large numbers and driving prices to a new high for the move of 97.585. As this report is being compiled on July 25, the September contract is trading 23.1 points lower, however it has made another new high for the move of 97.620, which is the highest print since mid March 2016.

The COT report released last Friday showed that leverage funds added 5,638 contracts to their long positions and also added 1,508 to their short positions. According to the latest report, leverage funds are short the dollar index by a ratio of 2.65:1, down sharply from the previous week of 4.67:1 and the ratio two weeks ago of 5.30:1.

We have been telling our readers that leverage funds are on the wrong side of the dollar index trade. Additionally, with the 10 year treasury note now on a short term sell signal, meaning higher interest rates, the dollar index has another market supporting its advance. On June 27, OIA announced that the September dollar index generated short and intermediate term buy signals. We have no recommendation.

From the July 15 research note on the Dollar Index:

“The COT report reveals that leverage funds remain heavily short the dollar index by a ratio of 4.67:1, though this is down from 5.30:1 the previous week, but up from the ratio two weeks ago a 4.17:1. As this report is being compiled on July 18 the dollar index is trading nearly unchanged.”

“The moving average setup is potentially bullish with the 20 day moving average standing 95.847, 50 day 95.185, which is likely to cross above the 100 day moving average of 95.231. The 200 day moving average stands at 96.741 and the high for the move during the past three months has been 96.865 made on June 27. For the dollar index to resume its rally in earnest, it not only must take out 96.865, it must make a daily low above it.”