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Soybeans:

November soybeans advanced 0.75 cents on light volume of 136,679 contracts. Total open interest increased by 3,203 contracts, which relative to volume is approximately 10% below average. The August contract lost 1,556 of open interest and September -928. As this report is being compiled on August 1, November soybeans are trading 19.75 cents lower and has made a low of 10.56, which is slightly above its contract low of 10.55 made on July 23. Soybeans are entering their crucial growing period, and unless the weather takes a turn for the worse, it appears that soybeans will likely continue their downward trajectory. Stand aside.

Corn:

September corn lost 4.75 cents on volume of 177,856 contracts. Volume declined from July 30 when September corn advanced 0.25 cents on volume of 221,083 contracts and total open interest declined by 4,119 contracts. On July 31, total open interest increased by 1,318 contracts, which relative to volume is approximately 55% below average. The September contract lost 4,234 of open interest, which makes the total open interest increase more impressive (bearish). As this report is being compiled on August 1, September corn is trading 0.75 lower and has made a new contract low of 3.51 1/2, which takes out the previous contract low of 3.56 1/2 made on July 24. Crop conditions for corn have been excellent, and the perception in the trade is that a big crop is on its way. Stand aside.

Chicago wheat:

September Chicago wheat advanced 3.00 cents on fairly heavy volume of 114,814 contracts. Volume was the strongest since July 17 when 140,124 contracts were traded and September Chicago wheat closed at 5.50 3/4.On July 31, total open interest declined by 1,647 contracts, which relative to volume is approximately 40% below average. The September contract accounted for loss of 4,262 of open interest.

September Kansas City wheat advanced 8.75 cents on heavy volume of 28,677 contracts. Volume was the highest since July 29 when September KC wheat lost 14.00 cents on volume of 29,285 and total open interest declined by 70 contracts.On July 31, total open interest increased by a massive 1,791 contracts, which relative to volume is approximately 140% above average meaning that aggressive new longs were entering the market in large numbers and driving prices higher.The September contract lost 418 of open interest. For the past 2 sessions, September Kansas City wheat has advanced 14.25 cents while total open interest has increased each day bringing the two-day increase to 2,834 contracts . This is bullish open interest action relative to the price advance. Chicago wheat has advanced 10.25 cents during the past 2 days while total open interest has increased by 2,084 contracts.  When wheat is ready to make a significant move, the Kansas City contract will likely lead the way.

As this report is being compiled on August 1, September Chicago wheat is trading 5.00 cents higher and has made a daily high of 5.44, which takes out the previous high of 5.43 1/4 made on July 28.September Kansas City wheat is trading 8.25 higher and has made a daily high of 6.42 1/4, which is the highest print since July 18 (6.53 3/4). Both September Chicago and Kansas City wheat remain on a short and intermediate term sell signal. Stand aside.

Live cattle:

October live cattle lost 2.60 cents on surprisingly light volume of 57,405 contracts. Volume was the highest since July 28 when October cattle lost 72.5 points on volume of 59,070 contracts and total open interest increased by 462 contracts. On July 31, total open interest declined 1,220 contracts, which relative to volume is approximately 15% below average. The August contract accounted for loss of 3,001 of open interest. Based upon the unimpressive volume and open interest, which declined less than average, it is apparent that market participants are digging in and refusing to liquidate.We have no idea whether the all-time high 1.6200 made on July 30 is the high for the move, however, the market can continue to decline for another 1 to 2 cents before it is in danger of generating a short-term sell signal.

Based upon OIA’s pivot point for August 1, the October contract would have to make a daily high below 1.53325 before a short-term sell signal would be generated. It is important to see open interest declines on price declines and if open interest begins to increase, this would be a sign the decline is something more serious. As this report is being compiled on August 1, October cattle is trading 1.75 cents lower and has made a daily low 1.54425. Stand aside.

WTI crude oil:

September WTI crude oil lost $2.10 on heavy volume of 715,067 contracts. Volume was the strongest since July 17 when September WTI advanced $1.60 on volume of 1,135,765 contracts and total open interest declined by 24,414 contracts. On July 31, total open interest declined by 19,981 contracts, which relative to volume is average. The September contract accounted for loss of 17,532 of open interest. The open interest decline on July 31 is the largest since July 22 when September WTI lost 47 cents on volume of 530,023 contracts and total open interest declined by 22,649 contracts. On July 22, the September contract closed at $102.39. In short, during the past several days when WTI has been trending lower, it was only yesterday that a larger than usual decline occurred. It will be interesting to see what the net long position of manage money is when the COT report is released today at 3:30 p.m. EDT. This will tell us how much more liquidation may be on the horizon.As this report is being compiled on August 1, the September contract is trading 74 cents lower on the day.In the July 21 report, OIA recommended the initiation of short call positions, and this trade has worked out very well . Continue to hold the position.  

Natural gas:

September natural gas advanced 5.5 cents on volume of 289,662 contracts. Volume was heavier than July 24 when September natural gas advanced 8.8 cents on volume of 276,321 contracts and total open interest declined by 14,658 contracts. On July 31, total open interest declined by 7,915 contracts, which relative to volume is average. As this report is being compiled on August 1, September natural gas is trading 1.6 cents lower. The low for the move, which occurred on July 28 of 3.725 may possibly be the seasonal low. Natural gas has certainly shed a large number of speculative longs, and we think it is highly likely that managed money has moved to a net short position, which is constructive going forward when the natural gas market turns around.

Copper:

September copper lost 1.05 cents on volume of 50,218 contracts. Total open interest declined by 1,518 contracts, which relative to volume is approximately 20% above average meaning that liquidation was heavier than normal, which is positive open interest action relative to the price decline. As we stated in yesterday’s report, we are thoroughly impressed by the solid performance of copper in the face of sharply declining equity, petroleum, grains and precious metal prices. Even so, on a year-to-date basis, September copper is down 4.08% as of yesterday’s close. In short, this is not a market on an uptrend, but one that is trading in a sideways to lower pattern. Stand aside.

Gold:

December gold lost $14.10 on volume of 158,284 contracts. Total open interest in increased by 690 contracts, which relative to volume is approximately 80% below average. However, this is the first open interest increased on a price decline that we have seen since gold topped out on July 10.As we have stated in previous reports, that market participants are enthusiastic about gold and therefore we have seen heavy declines of open interest and an open interest build on yesterday’s decline. As this report is being compiled on August 1, December gold is trading $11.90 higher and is made a daily high of 1298.40, which is just shy of yesterday’s high of 1298.80.On July 24, December gold generated a short term sell signal, and remarkably has not yet generated an intermediate term sell signal. Stand aside.

Platinum: On August 1, October platinum will generate a short-term sell signal, but remains on an intermediate term buy signal.

October platinum lost $16.70 on volume of 11,947 contracts. Total open interest declined by 481 contracts, which relative to volume is approximately 55% above average meaning that liquidation was heavy on the decline to a new low of 1462.50.As this report is being compiled on August 1, October platinum has made another new low for the move at $1456.30, which is the lowest print since June 25 (1456.20).Stand aside.

Silver:

September silver lost 18.5 cents on volume of 45,003 contracts. Total open interest increased by 1,092 contracts, which relative to volume is average. As this report is being compiled on August 1, September silver is trading 4.3 cents lower on the day. On July 28, September silver generated a short-term sell signal, but remains on an intermediate term buy signal. Stand aside.

British pound:

The September British pound lost 33 pips on volume of 107,273 contracts. Total open interest declined by 4,928 contracts, which relative to volume is approximately 75% above average meaning that large numbers of market participants were liquidating. As this report is being compiled on August 1, the September pound is trading lower again, this time by 49 pips and has made a new low for the move at 1.6805, which is the lowest print since 1.6775 made on June 12. On July 25, the September British pound generated a short-term sell signal, and remarkably has not yet generated an intermediate term sell signal, but is getting close.

From July 3 through July 31, the September pound has declined every day with the exception of July 9, July 15 and July 28.With the pound closing lower on August 1, it will have experienced 18 days of declines with only 3 days of advances. It will be interesting to see what the COT stats show with regard to the position of managed money.Undoubtedly, many of the companies that comprise this category are showing losses, and some probably significant losses. Stand aside.

Canadian dollar: On July 31, the September Canadian dollar generated an intermediate term sell signal, after generating a short-term sell signal on July 28.

The September Canadian dollar advanced 10 pips on volume of 61,686 contracts. Total open interest declined by 1418 contracts, which relative to volume is approximately 5% below average.For the past 4 days, the Canadian dollar has experienced a massive decline of open interest totaling 9,477 contracts while the September Canadian dollar has declined 62 pips.Stand aside.

10 year Treasury Note: On July 31, the September 10 year note generated a short-term buy signal, which reversed the short-term sell signal of July 23.  The September note remains on an intermediate term buy signal.

The September Treasury Note lost -015 on heavy volume of 1,902,420 contracts. Total open interest increased by 32,108 contracts, which relative to volume is approximately 35% less than average. As this report is being compiled on August 1, the September 10 year note is trading 20 points higher on heavy volume. In order for September notes to reverse the sell signal generated yesterday, the low for the day must be above OIA’s key pivot point of 125-095. Stand aside.

Coffee:

September coffee advanced an astounding 12.55 cents on very heavy volume of 41,847 contracts. This is the heaviest volume experienced by coffee since the advance began on July 17.Additionally, volume was the highest since June 13 when 46,331 contracts were traded and September coffee closed at 1.7645. On July 31, total open interest increased only 144 contracts, which relative to volume is approximately 80% below average. The September contract lost 445 of open interest and December -201. The open interest action on July 31 is disappointing to say the least and it indicates that potential market participants are not buying into the rally.

Yesterday, coffee made a new high for the move at 1.9640, and on August 1 has made another new high at $2.0740, which is the highest print since May 7 (2.0945).The two-day move is astounding in its magnitude, and after making the new high on August 1 sold off dramatically to close at 1.9235.Yesterday and today’s action is shaking out short sellers and the reversal today and a lower market on Monday is likely to shake out recent longs.

In the July 24 report, OIA recommended the initiation of the small bullish position and despite a lower close on Friday, clients should have significantly profitable positions.We think the market clearly got ahead of itself, and as we said in prior reports, coffee has been overdue for correction and today’s action likely signifies further downside ahead. Ultimately though, we think coffee prices are headed higher, perhaps significantly so. In any event, do not let this winning trade turn into a losing trade. If the market moves to a level that is close to your purchase price, liquidate it rather than risk a loss.