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Soybeans:

August and November soybeans both advanced 24.25 cents on volume of 162,404 contracts. Volume was disappointing considering that on July 24, August soybeans advanced 6.50 and November +8.25 on total volume of 204,103 contracts and open interest declined by 6,881 contracts. On July 28, total open interest declined by 9,119 contracts, which relative to volume is approximately 120% above average meaning that liquidation was extremely heavy on the advance. The August contract lost 5,425 of open interest. In short, market participants were liquidating as prices rallied to their highest levels in 2 weeks. This is bearish open interest action relative to the price advance. As this report is being compiled on July 29, August soybeans are trading 10.25 lower and November – 12.75.As we have said before, it will likely take a major weather event to turn the bearish psychology around. Stand aside.

Corn:

September corn gained 4.75 cents on volume of 177,084 contracts. Volume declined from 216,232 contracts traded on July 25 when September corn advanced 1.50 cents and total open interest increased by 6,272 contracts. On July 28, total open interest declined by a hefty 6,438 contracts, which relative to volume is approximately 45% above average, meaning that market participants were heavily liquidating long and short positions as prices moved to the highest level since July 24. The September contract lost 5,220 of open interest. As this report is being compiled on July 29, September corn has reversed and is now trading 6.25 lower on the day. Stand aside.

Chicago wheat:

September Chicago wheat lost 3.25 cents on volume of 59,120 contracts. Total open interest increased by a massive 6,333 contracts,which relative to volume is approximately 320% above average meaning that new short sellers aggressively entered the market and drove prices lower. The September contract rallied to 5.43 1/4, and apparently new short sellers took the opportunity to initiate positions at the highest price since July 24.The September 2014 through March 2015 contracts all gained open interest. As this report is being compiled on July 29, September wheat is trading 15.25 cents lower and is making new contract lows taking out the previous contract low of 5.20 1/4 made on July 23. Stand aside.

Live cattle:

August live cattle lost 5 points while the October contract lost 72.5 points on total volume of 59,070 contracts. Total open interest increased by 462 contracts, which relative to volume is approximately 60% below average. The August contract lost 1315 of open interest. As this report is being compiled on July 29, October cattle is trading 7.5 points lower while the August contract -27.5 points. At this juncture, we see no signs of the top, but caution against entering new long positions at current levels.

WTI crude oil:

September WTI crude oil lost 42 cents on light volume of 407,793 contracts. Volume fell below that of July 24 when September WTI lost $1.05 on volume of 417,636 contracts and total open interest declined by 8,536 contracts.Additionally, volume was the lowest since June 27 when 273,667 contracts were traded and the September contract closed at 105.04.In short, on July 24 and 28, when WTI declined, volume dried up, which means speculators are not panicking. The massive open interest declines seen in past two weeks were from the commercial sector according to the latest COT report, which showed this class of participant liquidating. However, managed money remained long by a ratio of 8.21:1, which was up from the previous week’s ratio of 7.45:1.

Managed money liquidation will fund the continued move lower.As clients know, we have been negative on WTI, and the partial extract from the July 20 report provides an example of our thinking on the subject. In the July 21 report, OIA recommended the initiation of short calls in the month and strike price of your choosing. This trade continues to work well, and as this report is being compiled on July 29, the September contract is trading $1.09 lower and has made a daily low of 100.37. Although, September WTI crude remains on an intermediate term buy signal, and a short-term sell signal, we think the intermediate term buy signal will be reversed during the next couple of days.

From the July 20 Weekend Wrap::

On July 3, August and September WTI generated a short-term sell signal and on July 11 generated an intermediate term sell signal. The short-term sell signal has not reversed and for this to occur September WTI must trade above 2 of OIA’s key pivot points: $102.34 and 103.82.The real battle for September crude will be to break above the pivot point range. If it is unable to accomplish this and open interest continues to act bearishly, we think the market will turn lower once again and the intermediate term buy signal generated on July 18 will be reversed. Stand aside.

Natural gas:

September natural gas lost 2.2 cents on volume of 227,914 contracts. Total open interest declined by a massive 10,379 contracts, which relative to volume is approximately 75% above average meaning that liquidation was extremely heavy. The market is still shaking out participants, and we would expect managed money to finally assume a net short position in the upcoming COT report, which is tabulated today and released this coming Friday at 3:30 p.m. EDT. Stand aside.

Canadian dollar: On July 28, the September Canadian dollar generated a short-term sell signal, but remains on an intermediate term buy signal.

The September Canadian dollar advanced 10 pips on volume of 36,915 contracts. Total open interest declined by a massive 3,737 contracts, which relative to volume is approximately 300% above average meaning that liquidation was extremely heavy even though the total range for the day was 18 pips.Beginning with the July 27 Weekend Wrap, we wrote about the Canadian dollar and the lopsided long position of managed money and that a sell signal would be generated. It appears the massive long position is beginning to unwind starting with yesterday’s trading. As this report is being compiled on July 29, the September Canadian dollar is trading 39 pips lower and has made a new low for the move at 91.93, which is the lowest print since 91.80 made on June 19.For the September Canadian dollar to generate an intermediate term sell signal, the high of the day must be below OIA’s key pivot point of 91.90. Wait for a counter trend rally before establishing new bearish positions.

From the July 27 Weekend Wrap:

“On July 3, the September Canadian dollar topped at 93.99 and since then has fallen to a low of 92.29 on July 25. From July 7 through July 24, total open interest has increased by 8,409 contracts while the September Canadian dollar has declined by 1.04 cents.”

“This is bearish open interest action relative to the price decline and is bad news for anyone long the Canadian dollar. However, it is particularly problematic for speculators who rushed into the Canadian dollar at the highest level since January 2014.We expect the September Canadian dollar to generate a short-term sell signal on July 28. The heavy net long position of manage money will fund and add fuel to the downside move.Wait until the short-term sell signal has been generated and after this a counter trend rally lasting 1-3 days before initiating bearish positions.”

Gold:

August gold closed unchanged on heavy volume of 209,625 contracts. Volume was the heaviest since July 24 when August gold lost $13.90 on volume of 217,582 contracts and total open interest declined by 4,019 contracts. On July 28, total open interest declined by a hefty 6,883 contracts, which relative to volume is approximately 35% above average meaning that liquidation was fairly heavy during a very narrow range trading day ($8.30).We have been surprised by the willingness of market participants to liquidate gold positions. We see no evidence of market participants digging in as prices move lower unlike WTI crude oil. For example, total open interest has declined every day from July 23 through July 28 and totals 17,562 contracts while August gold declined $3.00 in this time frame. This is a heavy open interest decline relative to the small price decline, and indicates market participants do not harbor strong feelings about gold one way or the other. On July 24, August gold generated a short-term sell signal, but remains on an intermediate term buy signal. Stand aside.

Silver: On July 28, September silver generated a short-term sell signal, but remains on an intermediate term buy signal.

September silver lost 6.9 cents on volume of 36,091 contracts. Total open interest declined by 902 contracts, which relative to volume is average.For September silver to generate in intermediate term sell signal, the daily high must be below OIA’s key pivot point of 19.90. We think there is a reasonable possibility that the pivot point may stem the decline in silver. Additionally, the 50 day moving average of 20.230 and the 200 day moving average of 20.390 also may serve as support. Stand aside.

Coffee:

September coffee advanced 1.95 cents on heavy volume of 27,100 contracts.Volume was the heaviest since July 11 when September coffee made a daily low of 1.5955 and closed at 1.6140. On July 28, total open interest increased by 900 contracts, which relative to volume is approximately 35% above average, meaning that new longs were entering the market and pushing coffee prices to a new high for the move (1.8340), which is the highest print since June 27 (1.8490). This area provides formidable resistance going back to late May.

The September contract lost 1470 of open interest, which makes the total open interest increased much more impressive (bullish). Preferably, we would like to see the market pull back, which would give clients an opportunity to add to the small bullish position we recommended in the July 24 report.Unfortunately, there is no good exit point for bullish positions, which is why we recommended options in the December contract. By carefully choosing strikes, clients can better control risk.