November soybeans advanced 12.25 cents on volume of 221,535 contracts. Total open interest declined by 2,774 contracts, which relative to volume is approximately 45% below average. The August contract, which is entering first notice day lost 11,975 of open interest and there were insufficient open interest increases in the forward months to totally offset the decline in the August contract. As this report is being compiled on July 28, the November contract is trading 2.50 cents lower and has made a daily high of 9.97, which slightly takes out yesterday’s print of 9.95. November soybeans remain on short and intermediate term sell signals. For speculative accounts, do not enter bearish positions at current levels.
September corn advanced 3.25 cents on volume of 235,167 contracts. Total open interest declined by 3,933 contracts, which relative to volume is approximately 35% below average, but an open interest decline on yesterday’s modest advanced is bearish. The September contract accounted for a loss of 5,994 of open interest. Corn has consistently displayed bearish open interest action relative to price advances and declines. As this report is being compiled on July 28, the September contract is trading 4.00 cents lower and has made a daily low of 3.30 3/4, which is the lowest print since 3.30 1/4 made on July 25. September corn remains on short and intermediate term sell signals. Stand aside.
October lean hogs lost 2.575 cents on volume of 41,319 contracts. Total open interest increased by 1,111 contracts, which relative to volume is average. Since generating a short term sell signal on June 30 and intermediate term sell signal on July 7 this is the first time that total open interest has increased on a price decline. This indicates that market participants have just begun to get bearish on the hog market.
The COT report, which was released last Friday showed that managed money liquidated 2,288 of their long positions and added 1,233 to their short positions while commercial interests liquidated 130 of their long positions and also liquidated 7,827 of their short positions. According to the latest report, managed money was long lean hogs by a ratio 4.50:1, which is down from the previous week of 5.09:1 and the ratio two weeks ago of 6.39:1.
As this report is being compiled on July 28 the October contract is trading 27.5 points lower and has made a new contract low of 59.275. The multi-year continuation low occurred during the week of November 16, 2015 when the December 2015 contract made a low of 51.800. Although the October contract is at major lows, we think rallies will be muted due to the substantial net long position of managed money who will be using any rally to trim losses. We have no recommendation.
October live cattle advanced 47.5 points on light volume of 39,938 contracts. Total open interest declined by 1,309 contracts, which relative to volume is approximately 15% above average and the reason for this is the imminent expiration of the August contract which enters first notice day shortly and lost 2,449 of open interest. Due to seasonal factors, we think live cattle could have a decent sized rally, but first it has to generate a short term buy signal. For this to occur, the low of the day must be above OIA’s key pivot point for July 28 of 112.190 and the low on July 28 has been 112.125. Wait for a buy signal before considering bullish positions.
WTI crude oil:
September WTI crude oil lost $1.00 on volume of 873,239 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 27, total open interest increased by a sizable 22,708 contracts, which relative to volume is average. This is the second day in a row in which total open interest has increased substantially on the price decline. On July 26, the September contract lost 21 cents and total open interest increased by 20,535. This pattern indicates that short-sellers are piling into the market as it makes new three month lows.
As this report is being compiled on July 28, the September contract is trading lower again, down 78 cents and has made a new low for the move of 41.04, which is the lowest print since 40.58 made on April 18. Continue to hold the short call positions recommended in the June 21 report. September WTI crude oil remains on short and intermediate term sell signals.
September natural gas is trading sharply higher on July 28 after the release of the EIA storage report. Currently, the September contract is trading 23.1 cents above yesterday’s close, or +8.57% on very heavy volume. On July 21 September natural gas generated a short term sell signal and currently remains on and intermediate term buy signal. For the short term sell signal to reverse and a new short term buy signal to occur, the low of the day must be above OIA key pivot point for July 28 of 2.824.
Typically, natural gas prices peak around mid-June and decline into August and the strongest months are September and October. We have been bullishly inclined towards natural gas and the moving average setup is distinctly bullish. The 20 day moving average is above the 50 day, which is above the 100 day and above the 200 day moving average. The fundamentals for natural gas as the EIA stats below show are not very good, but often markets anticipate improving fundamentals long before this becomes apparent.
On July 28 the Energy Information Administration announced that working gas in storage was 3,294 Bcf as of Friday, July 22, 2016, according to EIA estimates. This represents a net increase of 17 Bcf from the previous week. Stocks were 436 Bcf higher than last year at this time and 524 Bcf above the five-year average of 2,770 Bcf. At 3,294 Bcf, total working gas is above the five-year historical range.
December gold advanced $6.20 on very heavy volume of 422,627 contracts. Volume was the strongest since July 25 when gold lost 3.90 on volume of 413,123 contracts and total open interest increased by 12,011 contracts while the August contract lost 51,073. On July 27, total open interest declined by 7,655 contracts, which relative to volume is approximately 40% below average and accounting for the total open interest decline was the August contract, which approaches first notice day and lost 45,901. However it should be noted there were insufficient open interest increases in the forward months to offset the entire decline in the August contract, which we consider to be a slight negative.
After the release of the Federal Reserve statement yesterday, the gold market rallied strongly and made a high of 1350.00 even though it closed only modestly higher. As this report is being compiled on July 28 the December contract is trading $6.80 higher and is approximately $10.00 below today’s high for the move of 1352.60. On July 26, OIA announced that December gold generated a short term sell signal and it currently remains on and intermediate term buy signal. For the December contract to generate a short term buy signal, the low of the day must be above OIA’s key pivot point for July 28 of $1353.40. We continue to recommend a stand aside posture.
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