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Soybeans:

August soybeans advanced 6.50 cents while the November contract gained 8.25 on heavier than normal volume of 204,103 contracts. Interestingly, volume increased from July 23 when August soybeans advanced 17.00 cents and the November contract gained 18.75 on total volume of 188,127 contracts while open interest increased by 1,750 contracts. In other words, volume was considerably greater on July 24 even though prices advanced by a much smaller amount compared to July 23. On July 24, total open interest declined by 6,881 contracts, which relative to volume is approximately 35% above average meaning that liquidation was fairly heavy on the modest advance.The August contract lost 1,639 of open interest, September -653, November -4726. When the price and open interest stats of July 23 and 24 are combined, August soybeans advanced 25.25  cents while November gained 27.00 and open interest declined by 5,131 contracts during 2 days.. This is clearly bearish open interest action relative to the price advance. Stand aside.

Corn:

September corn lost 1.00 cent on total volume of 251,308 contracts. Volume was the heaviest since July 16 when September corn advanced 4.25 cents on volume of 253,121 contracts and total open interest declined by 15,260 contracts. On July 24, total open interest increased again, this time by 11,447 contracts, which relative to volume is approximately 75% above average meaning that aggressive new short sellers were heavily entering the market and driving prices to a new contract low (3.56 1/2). This is the 2nd day in a row that open interest has increased dramatically, and during the past 2 days corn prices have advanced 1.25 cents while total open interest has increased by a massive 29,707 contracts. In other words, the massive increase of open interest is not driving prices significantly lower and may be the catalyst for higher prices. This may be a signal that September corn is in the process of making a temporary bottom. As this report is being compiled on July 25, September corn is trading 0.25 cents higher, but has not taken out yesterday’s low. Stand aside.

Chicago wheat:

September Chicago wheat lost 2.00 cents on fairly heavy volume of 100,368 contracts. Volume was the heaviest since July 17 when September wheat advanced 12.75 cents on volume of 140,124 contracts and total open interest declined by 1606 contracts. On July 24, total open interest increased only 378 contracts, which is minuscule and dramatically below average. The September contract lost 3,974 of open interest. As this report is being compiled on July 25, September Chicago wheat is trading 9.00 cents higher and the Kansas City contract is trading 9.25 above yesterday’s close. On July 24, September Kansas City wheat made a new low for the move at 6.18 3/4, which is above the contract low of $6.08 3/4. On July 23, September Chicago wheat made a new contract low at 5.20 1/4. It appears that wheat may be at the end of its harvest pressure, speculative long liquidation and new short selling by market participants. Despite this, both Chicago and Kansas City wheat remain on a short and intermediate term sell signal. Stand aside.

Live cattle:

August live cattle advanced 50 points on heavy volume of 86,614 contracts. Volume increased from July 23 when August cattle advanced 10 points on volume of 82,227 contracts and total open interest declined by 269 contracts.Additionally, volume was the highest since July 11 when August cattle advanced 97.5 points on volume of 93,526 contracts and total open interest increased by 1,186 contracts.On July 24, total open interest declined by a massive 3,390 contracts, which relative to volume is approximately 55% above average meaning that liquidation was heavy on the modest advance as August cattle made a new all-time high at 1.58650. Both August and October contracts lost open interest of 3,005 and 1,036 respectively.As this report is being compiled on July 25, August cattle is trading 2.150 cents higher and has made another new all-time high at 1.59000. As mentioned in previous reports, we continue to be concerned about the hefty open interest decline as prices move into the stratosphere. Stand aside, unless long from significantly lower levels.

Lean Hogs: On July 24, October lean hogs generated a short-term sell signal, but remains on an intermediate term buy signal.

WTI crude oil:

September WTI crude oil lost $1.05 on surprisingly light total volume of 417,636 contracts.Volume was the lightest since July 7 when August WTI crude oil lost 24 cents on total volume of 411,475 contracts and total open interest increased by 1,605 contracts. On July 24, open interest declined again, this time by 8,536 contracts, which relative to volume is approximately 20% below average. The September contract accounted for loss of 7,266 of open interest. Amazingly, open interest has declined every day beginning on July 14 and through July 24 and totals a massive 107,983 contract decline while September WTI crude oil advanced $1.77 in this time frame. This is very bearish open interest action relative to the price advance. Market participants continue to take advantage of the rally to liquidate positions. As this report is being compiled on July 25, September WTI crude oil is trading 10 cents lower on the day and has made a daily low of 101.00, which is below yesterday’s low of 101.88 and is the lowest print since 100.61 made on July 17. In the report of July 21, OIA recommended the initiation of a short call position, and this position should continue to be held.

Natural gas:

September natural gas advanced 8.8 cents on total volume of 276,321 contracts. Volume was the strongest since July 21 when natural gas lost 10.2 cents on volume of 295,599 contracts and total open interest declined by 8,844 contracts. On July 24, total open interest declined by a massive 14,658 contracts, which relative to volume is approximately 100% above average meaning that liquidation was extremely heavy on the modest advance. This is clearly bearish open interest action relative to the price advance. The August contract accounted for loss of 13,096 of open interest. The open interest decline on July 24 is the largest going back to at least June 2 when natural gas was trading in the $4.60 range. The open interest decline also provides additional corroboration that market participants are still in the process of liquidating, and this has to run its course before natural gas can put in a seasonal low. Natural gas remains on a short and intermediate term sell signal. Stand aside.

Copper:

September copper advanced 5.95 cents on heavy volume of 71,826 contracts.Volume was the heaviest since June 26 when 78,608 contracts were traded and September copper closed at $3.1720.On July 24, total open interest increased by 1,925 contracts, which relative to volume is average. Although volume showed that participation was elevated, there was just an average number of market participants who were willing to make commitments at yesterday’s prices. As this report is being compiled on July 25, September copper is trading 2.05 cents lower and has made a daily low of 3.2380, which is exactly OIA’s key pivot point.Our reading of market action on July 25 with the low the day at exactly OIA’s key pivot point is that copper should trend higher, but we continue to advise a stand aside posture.

From the July 23 report:

“September copper must make a daily low above OIA’s key pivot point for July 24 of 3.2380 if it is to continue the rally.Despite our thinking that copper was headed for a sell signal, we have recommended a stand aside posture until the sell signal was confirmed. September copper remains on a short and intermediate term buy signal. Stand aside.”

Gold: On July 24, August gold generated a short-term sell signal, but remains on an intermediate term buy signal.

August gold lost $13.90 on heavy volume of 217,582 contracts. Volume was the strongest since July 14 when August gold lost 30.70 on volume of 240,101 contracts and total open interest declined by 3,845 contracts. On July 24, total open interest declined by 4019 contracts, which relative to volume is approximately 25% below average. However, continued liquidation on price declines is constructive for gold longer-term. The market is shedding speculative longs, which will eventually put gold on a more sound footing. Our protocols indicate a likelihood of a 1-3 day counter trend rally, and this is the opportunity to initiate bearish positions. On July 25, August gold is experiencing the first day of the counter trend rally, and any further advance will be an opportunity to initiate bearish positions.

Silver: On July 25, September silver will generate a short-term sell signal, but it remains on an intermediate term buy signal.

September silver lost 58 cents on heavy volume of 67,327 contracts. Volume was the highest since June 27 when 71,886 contracts were traded and September silver closed at $21.134. On July 24, total open interest declined by 1718 contracts, which relative to volume is  average. As this report is being compiled on July 25, silver is trading 19.5 cents higher. If September silver makes a daily high below OIA’s the pivot point of 20.40, the market will continue this move lower. With silver on a short-term sell signal, the market should have a counter trend rally lasting from 1-3 days, and this is the opportunity to establish bearish positions if you are so inclined.

Coffee:  On July 24, September coffee generated a short-term buy signal, but remains on an intermediate term sell signal.

OIA recommends the initiation of a small bullish position in coffee. We recommend the use of options due to coffee’s volatility and suggests the December contract for this purpose.

September coffee advanced 1.70 cents on volume of 19,932 contracts. Volume shrank from July 23 when September coffee advanced 8.30 cents On volume of 20,896 contracts and open interest increased by a massive 1,321 contracts. On July 24, total open interest increased by 489 contracts, which relative to volume is average. The September contract lost 519 of open interest, which makes the open interest increase much more impressive (bullish).

As this report is being compiled on July 25, September coffee is trading 1.05 cents higher and has made a daily low of 1.7660, which is above the low of July 24 (1.7570). OIA is recommending the initiation of a small bullish position for a number of reasons: (1) the long to short ratio as of the COT tabulation date of July 15 registered a reading of 4.18:1.This ratio is the lowest since the COT tabulation date of March 4, 2014 when managed money was long coffee by ratio of 3.62:1. The trading range encompassed by the March 4 report (February 26-March 4) was from $1.7490 – 2.0150. The trading range during the July 15 report: 1.5925 – 1.7490.

(2) We think it is highly likely that the ratio of this week’s report will be lower (report is released at 2:30 p.m. CDT) and both longs and shorts have been blown out of the market, therefore, selling pressure by longs has been greatly diminished. The only hope for coffee bears is that masses of new short sellers enter the market.(3) The fundamentals for coffee are highly bullish, and are the strongest for any commodity traded. (4) There could be a weather event, which would add additional bullish fuel to the fire and could send coffee prices to all-time highs.(5) Once coffee begins to rally in earnest, volatility would increased dramatically, which would make it difficult to get on board without excessive downside risk, and option volatility would increase making options significantly more expensive.

As clients know, our standard operating procedure is to wait for a pullback of at least a day and possibly 2 or 3 before recommending bullish positions. This is why we are recommending a small position and each client should take into account that coffee can certainly pull back from here and some temporary losses maybe sustained as a result.For September coffee to reverse the buy signal, the high for the day would have to be below OIA’s key pivot point of 1.6970. This is not to say it cannot happen, because signals occasionally reverse. However, with fundamentals of coffee being what they are, we think the worst is over and that prices will move higher during 2014.