Bloomberg Access:{OIAR<GO>}

Soybeans:

November soybeans lost 7.50 cents on volume of 185,194 contracts. Volume was the weakest since July 21 when soybeans gained 5.50 cents on volume of 185,747 contracts and total open interest declined by 7,248. On August 26, total open interest declined by 7,798 contracts, which relative to volume is approximately 65% above average indicating that liquidation was heavy. The August contract accounted for a loss of 7,985 of open interest.

Yesterday, November soybeans made a low of 9.63, which matches the low made on July 25. This was the lowest print since 9.65 3/4 made on April 19 and is substantially above the contract low of 8.50 made on September 11, 2015. As this report is being compiled on July 27, the November contract is seeing a little bit of a rally, but this occurred yesterday as well and the market closed lower. As we have said in prior reports, rallies will be met by speculative longs selling and looking to trim losses. This phenomena will continue until they have been blown out of the market in substantial numbers. Additionally, hot dry weather needs to be persistent before market participants become concerned and a weather premium begins to build. Stand aside.

Corn:

September corn lost 2.25 cents on volume of 259,031 contracts. Total open interest increased by massive 12,355 contracts, which relative to volume is approximately 75% above average indicating that aggressive new short-sellers were entering the market in large numbers and driving prices lower (3.31). Most troubling was that open interest increased in the September 2016 through March 2018 contracts. In other words extreme bearishness is occurring at contract lows last seen during September and October 2014.

While we think adding to short positions at contract lows is unwise, it does represent an extremely bearish mindset among many market participants. On July 19, total open interest increased massively near contract lows and we pointed this out in our research note on corn (see below).

As this report is being compiled on July 27 the September contract is seeing a bit of a rally, up 4.00 cents and has made a daily high of 3.38, which is the highest price since 3.38 1/4 made on July 25. September corn remains on short and intermediate term sell signals. We have no recommendation except that speculators should NOT be initiating bearish positions at current levels.

From the July research note on corn:

“On July 19, total open interest increased by a massive of 11,195 contracts, which relative to volume is approximately 60% above average meaning aggressive new short-sellers were entering the market in large numbers and driving prices  to 3.41 1/2, the lowest print since 3.40 1/2 made on July 7. The remarkable aspect of yesterday’s massive open interest increase  is that it occurred on a strong price decline near the contract low of 3.39, which indicates that new short-sellers were confident of entering sell orders at historically low prices.”

WTI crude oil:

September WTI crude oil lost 21 cents on volume of 783,121 contracts. Volume was the strongest since July 20 when the September contract gained 21 cents on volume of 917,390 contracts and total open interest declined by 7,267. On July 26, total open interest increased by a substantial 20,535 contracts, which relative to volume is average, but is a large number nonetheless considering that crude oil was trading at multi-month lows in yesterday’s trading.

As this report is being compiled on July 27 the September contract is trading sharply lower after the release of the EIA report which showed a stock increase of 1.7 million barrels  and the September contract is trading $1.08 lower or -2.54% and has made a daily low of 41.73, which is the lowest print for the September contract since 40.58 made on April 18. 

Also on July 27, the September gasoline contract is trading sharply lower, down 3.98 or -2.96% and has made a daily low 1.2995, which is the lowest print since 1.3066 made on March 4. September gasoline generated a short term sell signal on June 21 and an intermediate term sell signal on July 1. Continue to hold the short call position in crude oil recommended in the report of June 21.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.7 million barrels from the previous week. At 521.1 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories increased by 0.5 million barrels last week, and are well above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories decreased by 0.8 million barrels last week but are above the upper limit of the average range for this time of year. Propane/propylene inventories rose 2.2 million barrels last week and are at the upper limit of the average range. Total commercial petroleum inventories increased by 2.7 million barrels last week

Gold: On July 26 December 2016 NY gold generated a short term sell signal, but remains on and intermediate term buy signal.

December gold advanced $1.10 on substantial volume of 316,697 contracts. Volume fell from July 25 when gold lost 3.90 on volume of 413,123 contracts and total open interest increased by 12,011. On July 26, total open interest declined by 33,097 contracts, which relative to volume is approximately 300% above average, but the August contract which enters first notice day shortly lost 60,321 contracts.

As this report is being compiled prior to the release of the Federal Reserve statement after their two day meeting, December gold is trading $5.90 higher on the day and has made a daily high 1336.80, which takes out yesterday’s print of 1332.00. We have been very impressed with the way that gold has traded ever since it topped on July 6 at 1384.40. Currently, the December contract is trading approximately $10.00 below its 20 day moving average of 1343.90 and approximately $34.00 above its 50 day moving average of 1299.70.

As we pointed out in yesterday’s report, the gold market is beginning to enter its strong seasonal period and once a new short term buy signal  is generated, we would strongly advocate initiating new bullish positions. For now, stand aside.