Bloomberg Access:{OIAR<GO>}

Soybeans:

November soybeans lost 8.00 cents on volume of 192,586 contracts. Total open interest declined by 8,912, which relative to volume is approximately 75% above average. Accounting for this was the decline in the August contract of 9,834 of open interest. As this report is being compiled on July 29, the November contract is trading 13.75 cents above yesterday’s close and has made a daily high of 9.94 1/2, which is below yesterday’s print of 9.97 and the July 27 high of 9.95. November soybeans remain on short and intermediate term sell signals. For speculative accounts, stand aside.

Corn:

September corn lost 4.50 cents on volume of 253,007 contracts. Volume increased from July 27 when the September contract gained 3.25 cents on volume of 235,167 contracts and total open interest declined by 3,933, a bearish reading. On July 28, total open interest increased by 3,478, which relative to volume is approximately 45% below average, and a total open interest increase on yesterday’s decline continues the pattern of bearish open interest action we’ve seen for the past couple of weeks. The September contract accounted for a loss of 7,266 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in September and increase total open interest. September corn is trading unchanged on July 29 and remains on short and intermediate term sell signals. Stand aside for speculative accounts.

WTI crude oil:

September WTI crude oil lost 78 cents on light volume of 733,125 contracts. Volume fell from July 27 when the September contract lost $1.00 on volume of 873,239 contracts and total open interest increased by 22,708. Additionally, volume was below that of July 26 when the September contract lost 21 cents on volume of 783,120 contracts and total open interest increased by 20,535.

On July 28, total open interest increased for the fourth day in a row on a price decline, this time by 9,629 contracts, which relative to volume is approximately 45% below average, but the 4 day consecutive total open interest increase on price declines is bearish and indicates that market participants are willing to initiate bearish positions at the low end of the trading range, which means they think prices are going substantially lower. 

As this report is being compiled on July 29 the September contract is trading 11 cents above yesterday’s close and has made a new low for the move of 40.57, which is 1 penny below the April 18 print of 40.58. 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. Maintain the short call positions recommended in the June 21 report.

Natural gas: September natural gas will generate a short term buy signal on July 29 if the daily low in the September contract remains above OIA’s key pivot point for July 29 of $2.822. September and October contracts remain on intermediate term buy signals.

September natural gas advanced by a very strong 21.3 cents on heavy volume of 559,365 contracts. Volume was the strongest since June 9 when natural gas gained 14.9 cents on extraordinarily high volume of 802,192 contracts, a record high for 2016 while total open interest increased by massive 22,736 contracts. On July 28, total open interest increased by a massive 21,059 contracts, which relative to volume is approximately 40% above average meaning aggressive new buyers were entering the natural gas market in very large numbers and driving prices to a new high for the move of $2.893.

As this report is being compiled on July 29, the September contract is trading 1.7 cents above yesterday’s close and has made a new high for the move of 2.911, which is the highest print since $2.944 made on July 5. After the short term buy signal, the market should experience a pullback lasting 1 the-3 days before attempting to test the high for the move of 2.990 made on July 1.

Again, we caution that natural gas prices tend to peak in the mid-June time frame and then decline into August. Like any seasonal pattern, there are variations, and therefore we are uncomfortable recommending bullish positions in natural gas knowing that this seasonal trend could take hold at any time. The strongest months for natural gas performance is September and October.

Dollar index: The September dollar index is getting close to generating a short term sell signal and this will occur if the daily high is below OIA’s key pivot point for July 29 of 96.215.

The September dollar index lost 32.1 points on volume of 23,869 contracts. Total open interest declined just 84 contracts. On July 29, as this report is being compiled, the September contract is trading sharply lower, down 1.07 points and has made a daily low of 95.335, which is the lowest print since 95.375 made on July 5. It appears likely that the short term sell signal will be generated on Monday. We have no recommendation.

Euro: The September euro is getting close to generating a short term sell signal and this will occur if the daily low is above OIA’s key pivot point for July 29 of 1.1132.

The September euro gained 52 pips on volume of 143,834 contracts. Total open interest declined by 8,503 contracts, which relative to volume is approximately 140% above average meaning that short-sellers were powering the market higher. We know that managed money is heavily short the euro and according to the COT report released last Friday they were short by ratio of 3.20:1, which was up from the previous week of 3.07:1 and the ratio two weeks ago of 2.48:1. In summary, because managed money is substantially short and if the euro generates a short term buy signal, short-sellers will provide the fuel for sending the market higher. We have no recommendation.

Yen:

The September Japanese yen will generate a short term buy signal on Monday. This will reverse the short term sell signal of July 14. The September contract currently remains on an intermediate term buy signal. The yen is rocketing higher on July 29 due to the Japanese central bank’s failure to initiate more aggressive easing measures and currently is trading 293 pips above yesterday’s close or +3.09%.

Gold: December gold is getting close to generating a short term buy signal and this will occur if the daily low is above OIA’s key pivot point for July 29 of $1354.40. Currently, the December contract remains on a short term sell signal and and intermediate term buy signal. The short term sell signal was generated on July 26.

December gold advanced $6.70 on volume of 272,392 contracts. Volume fell dramatically from July 27 when the December contract gained 6.20 on volume of 422,627 contracts and total open interest declined by 7,655. On July 28 total open interest declined by 5,058 contracts, which relative to volume is approximately 25% below average. The August contract which will be expiring shortly lost 27,873 of open interest.

As this report is being compiled on July 29, the September contract is rocketing higher, up $17.50 and has made a new high for the move of 1358,070, which takes out the July 14 print of 1355.40. After the close of the equity market, the results of the European bank stress test will be released and it appears likely the gold market is anticipating some very negative results. We continue to recommend a stand aside posture until such time that December gold generates a short term buy signal. Once this occurs, gold should pull back from 1-3 days and this will be the opportunity to initiate bullish positions.