Soybeans:

September soybeans gained 38 cents on heavier volume of 230,198 contracts. Volume was the highest since July 25 when 228,171 contracts were traded and September soybeans closed at $12.66 3/4. On August 12, open interest declined by 1,215 contracts, which is approximately 75% below average. The August and September contracts lost a total of 1,253 of open interest. Although the market rallied sharply, open interest action was indicative of shorts getting blown out. The crop report was very supportive for soybeans and it took the market by surprise that ending stocks for the 2013-2014 season were reduced to 220 million bushels, which was down from 295 mb in the July report. Planted acreage was reduced from 77.7 million acres to 77.2 million acres. Also, the average yield was cut to 42.6 bushels per acre from 45.5 bpa in the July report. As of the latest COT report, managed money is short at the highest level in well over a year. The market is likely to experience sharp rallies because the crucial growing season is ahead. Soybeans remain on a short and intermediate term sell signal.

Soybean meal: On August 12, September soybean meal generated an intermediate term buy signal, but remains on a short-term sell signal.

September soybean meal gained $12.10 on heavier than normal volume of 100,457 contracts. Total open interest increased by 919 contracts, which relative to volume is approximately 50% less than average. The August and September contracts lost a total of 395 of open interest. We advise standing aside until soybean meal generates a short-term buy signal.

Corn:

September corn gained 6.25 cents on very heavy volume of 440,393 contracts. Volume was the highest since June 28 when 443,821 contracts were traded and September corn closed at $5.40 1/4. On August 12, total open interest increased by 7,775 contracts, which relative to volume is approximately 25% less than average. The September contract lost 14,871 of open interest. Knowing that the net short position of managed money is at the highest level in a number of years, it was surprising that open interest didn’t decline on the advance. Yesterday’s crop report showed that the average yield was lowered to 154.4 bushels per acre versus 156.5 in the July report. Ending stocks for the 2013-2014 season came in at 1.837 billion bushels versus 1.959 billion in the July report. Total production was pegged at 13.763 billion bushels versus July’s report of 13.950 billion. Corn remains on a short and intermediate term sell signal.

Wheat:

September Chicago wheat advanced 1.50 cents on heavy volume of 163,636 contracts. Total open interest declined by 11,149 contracts, which relative to volume is approximately 65% less than average. The September contract lost a total of 12,813 of open interest. The crop report showed that carry out for all wheat categories in the 2013 2014 season is 551 million bushels versus 576 mb in the July report. Chicago wheat carry out is 111 mb versus 113 mb in the July report and is the smallest carryover since the 2007-2008 season. Kansas City wheat carry out was reported at 197 mb versus 209 mb in the July report. Again, this is the lowest carry out since the 2007-2008 season. Wheat remains on a short and intermediate term sell signal.

Cotton:

December cotton gained 1.15 cents on volume of 27,029 contracts. Open interest increased by a massive 5,010 contracts, which relative to volume is approximately 525% above average. As of August 12, total open interest in cotton is 198,452 contracts, which is the highest total since April 11 when it reached 210,629 contracts. On that day, cotton closed at 85.66. The crop report indicated that US ending stocks would come in at 2.8 million bales, which is down 100,000 from the July report. World production came in at 116.30  mb, which is down from 118.02 mb in the July report. Additionally, world carry out was reduced from 94.34 mb to 93.77 mb. Cotton is experiencing near term tightness, which we expect to pass shortly.

Cotton has a history of having supply/demand bottlenecks, which can take cotton prices to stratospheric levels followed by a precipitous drop. On August 7, December cotton generated a short and intermediate term buy signal. We have been advising a stand aside position due to the massive build up in open interest, which makes cotton vulnerable to sharp setbacks. Prior to cotton generating a short and intermediate term buy signal, we advised clients to cover bearish positions at 86.55. As this report is being compiled on August 13, December cotton is trading 1.39 cents higher and has made a new high for the move at 92.54. However, the high in cotton going back to April 2012 has been 93.43 and this has been resistance on 2 prior occasions.

Live cattle:

October live cattle gained 52 points on light volume of 30,037 contracts. Total open interest increased by 762 contracts, which relative to volume is average. The August contract lost 956 of open interest. Cattle made a new high for the move on August 12 of 1.27700 and this has been taken out with trading on August 13 at 1.28550. We have been advising to wait for a setback before initiating bullish positions after cattle generated its short and intermediate term buy signals on August 8.

 Crude oil:

September crude oil gained 14 cents on volume of 555,788 contracts. Total open interest increased by 2,615 contracts, which relative to volume is approximately 75% below average. The September contract lost 26,327 of open interest. As this report is being compiled on August 13, September crude is trading 78 cents higher and has made a new high for the move at $107.20. It now appears the market is poised to retest the highs near $109.00, however, it appears there is not much enthusiasm for the upside by market participants. WTI remains on a short and intermediate term buy signal.

Natural gas:

September natural gas gained 8 cents on heavy volume of 479,741 contracts. Total open interest declined by 6,795 contracts, which relative to volume is approximately 40% less than average. The September contract accounted for loss of 30,139 of open interest. Natural gas remains on a short and intermediate term sell signal.

Gold:

December gold gained $22.00 on volume of 152,757 contracts. Total open interest declined by 219 contracts. The August contract accounted for loss of 243 of open interest. Considering that gold made a new high for the move at $1343.70 and it advanced by a significant amount, volume was disappointing and the open interest action was negative. Despite this, December gold generated a short-term buy signal on August 9, and we expect it to work its way higher after a setback according to our 1-3 day corrective protocol. Do not enter new long positions current levels.

Silver:

September silver gained a whopping 93.2 cents on heavy volume of 85,809 contracts. Volume was the highest since June 28 when silver made its low for the entire move at $18.17, but closed at $19.47 in what should be considered a key reversal day. On August 12, total open interest increased by 4,908 contracts, which relative to volume is approximately 120% above average, meaning that new longs were piling into the market aggressively and pushing prices significantly higher. The September contract accounted for loss of 696 of open interest. Of the 2 precious metals, silver clearly performed the best in 3 important categories: percentage price advance, volume and open interest. Silver has a very distinct tendency to make huge moves is in a compressed period of time. At this juncture, it is best to wait for a setback before contemplating bulliish positions. Silver remains on a short-term buy signal, but an intermediate term sell signal.

Euro:

The September euro lost 30 points on volume of 143,752 contracts. Open interest increased by 890 contracts, which relative to volume is approximately 70% below average. We been advising clients to stand aside and wait for correction before entering bullish positions in the euro. We have seen lower closes for the past 2 days, and it appears that a 3rd lower close in store on August 13. The critical area to watch for is the August 2 low of 1.3187. If the euro can maintain strength above this level, we could see an opportunity to initiate bullish positions.  It is important to keep in mind that managed money has gotten increasingly net long in the euro as the market has reached the upper end of its trading range. For example, the latest COT report showed that managed money was long the euro by a ratio of 1.15:1, which was up dramatically from the previous week when they were short by a ratio of 1.01:1 and the ratio of 2 weeks ago when managed money was short by 1.43:1. As a consequence, there is going to be an inordinate amount of selling pressure in the euro due to the Johnny-come-lately trend followers who have piled in at the top. The euro remains on a short and intermediate term buy signal.

S&P 500 E mini:

The S&P 500 E mini gained 0.75 points on light volume of 1,257,901 contracts. Open interest increased by 16,744 contracts, which relative to volume is approximately 45% less than average. Clients are encouraged to initiate long put protection, especially for those who hold long equity positions.