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Soybeans:
September soybeans closed 14.75 cents higher on light light volume of 98,990 contracts. According to our research, this is the lowest volume since 2012. The lowest volume we were able to find occurred on January 27, 2012 when 101,330 contracts were traded. Open interest increased by a minor 895 contracts, which in relation to volume is less than 50% of average. Due to the enormous demand for soybeans at current prices, we believe soybeans will continue to trade at elevated levels. Additionally, it is highly likely that the market will test the July 20 high of $17.77 3/4. Soybeans are overbought relative to its 50 day moving average of $15.88 1/4, but with tight supplies continuing through the end of this year and into early 2013, setbacks will likely be shallow.
Soybean meal:
October soybean meal gained $9.20 on extremely light volume of 46,258 contracts. Volume declined by approximately 6,000 contracts from August 16 when soybean meal lost $3.10 and open interest increased by 3,309 contracts. On August 17, open interest increased by 3,629 contracts, which in relation to volume is over 300% of average. The open interest action in soybean meal has been outstanding compared to soybeans. We continue to advocate the long October soybean meal short December soybean meal and speculators should exit the position if the market penetrates $4.90, which was the low on August 3.
Corn:
December corn closed 0.25 cents lower on volume of 197,061 contracts. Volume declined approximately 11,000 contracts from August 16 when corn closed 3.50 cents higher and open interest increased by 11,807 contracts. On August 17, open interest declined by 1,916 contracts which in relation to volume is 50% less than average. Currently, corn is trading 14.50 cents higher, and we suggest when the market moves to the $8.29-$8.31 level, that speculators write calls for out of the money December options. The further out of the money the option is, the less risk assumed.
Wheat:
December wheat closed 12.75 cents higher on very light volume of 76,757 contracts. Open interest declined by 9,500 contracts from August 16 when wheat gained 15.00 cents and open interest increased by 2,346 contracts. On August 17, open interest increased by 1,143 contracts, which in relation to volume is approximately 30% less than average. The wheat market has been acting very well and open interest advances/declines have been congruent with price action. We prefer to wait until the end of August or after Labor Day before recommending that bullish positions be implemented.
Crude oil:
September crude oil gained 43.00 cents on volume of 489,470 contracts. Volume declined approximately 33,000 contracts from August 16 when crude oil advanced $1.27 and open interest declined by 10,717 contracts. September crude oil made a new high for the move at $96.28 and open interest increased by 3,464 contracts, which in relation to volume is approximately 70% less than average. As indicated in the August 19 report, production and consumption crude indicate that demand is faltering. Despite this, crude has continued to move higher, because of the hope of more money printing by the Europeans and the Federal Reserve. Despite the move higher, crude oil has not yet generated an intermediate term buy signal. The market has to close above its 200 day moving average of $96.71 in order to have a chance of moving higher.
Heating oil:
September heating oil lost 3.03 cents on very light volume of 119,572 contracts. Volume declined by approximately 34,000 contracts from August 16 when heating oil advanced 3.77 cents and open interest declined by 1,661 contracts. On August 17, open interest advanced by 4,873, which in relation to volume is approximately 100% above average. Open interest action relative to price has been bearish, but this is likely to change as we move into the fall. On August 6 and August 8, heating oil generated a short and intermediate term buy signal.
Gasoline:
September gasoline lost 5.57 cents on volume of 155,479 contracts. Volume increased by approximately 32,000 contracts from August 16 when gasoline closed unchanged and open interest increased by 2,802 contracts. On August 17, open interest increased by a massive 9,434 contracts, which in relation to volume is approximately 300% greater than average. On Friday, longs and shorts had very strong opinions about the direction of gasoline prices. As this report is being compiled, gasoline is trading 1.40 cents higher. On July 16, gasoline generated a short-term buy signal and on August 6 generated an intermediate term buy signal.
Natural gas: On August 17 September natural gas generated a short-term sell signal.
Copper:
September copper gained 3.70 cents on volume of 61,353 contracts. Volume increased by approximately 400 contracts from August 16 when copper gained 3.30 cents and open interest declined by 1,304 contracts. For the second day in a row, copper advanced, but open interest also declined for the second day in a row by 1,717 contracts, which in relation to volume is average. We believe that speculators should stand aside in copper due to the possibility of money printing by the Europeans and the Federal Reserve, which could send copper higher. On the other hand, based upon the terrible performance of the Shanghai composite index, the outlook for copper and other base metals continues to be bearish.
Gold:
December gold gained 20.00 cents on very light volume of 82,277 contracts. According to our research, August 17, had the lightest volume to date for 2012. Open interest declined by 974 contracts which in relation to volume is approximately 50% less than average. The market generated a short-term buy signal on July 27, but has not yet generated in intermediate term buy signal. In previous reports, we suggested that speculators write out of the money puts on options for the December contract.
Silver:
September silver lost 21.00 cents on very light volume of 28,918 contracts. Volume declined by approximately 30,000 contracts from August 16 when silver advanced 40.00 cents and open interest increased by 1,254 contracts. As this report is being compiled on August 20, silver is trading 58.5 cents higher. If the low of 27.875 holds on August 20, a short-term buy signal will be generated. In previous reports, we have suggested that speculators write puts in out of the money options for the December contract.
Euro:
The September Euro lost 42 points on volume of 199,061 contracts. Volume declined by approximately 24,000 contracts from August 16 when the Euro gained 73 points and open interest declined by 3,031 contracts. On August 17, open interest declined by 429 contracts, which is a negligible decrease of open interest relative to volume. Stand aside
10 Year Treasury Notes:
The September Treasury Note gained 4.5 points on light volume of 693,462 contracts. Volume declined almost 400,000 contracts from August 16 when notes fell 7 points and open interest increased by 15,188 contracts. On August 17, open interest declined by 11,897 contracts which in relation to volume is below average. The market is acting in a very bearish fashion and since breaking down several days ago has not been able to mount a decent size rally. Based upon the recent action, it does not appear that a rally is in the offing. On August 14 and 16, Treasury Notes generated short and intermediate term sell signals respectively. As bearish as we are on notes, it is difficult to recommend that speculators enter into bearish positions with the market massively oversold.
S&P 500 E mini:
The S&P 500 E mini gained 2.25 points on light volume of 1,141,998 contracts. Volume declined by approximately 350,000 contracts from August 16 when the E mini gained 9.50 points and open interest increased by 7,356 contracts. On August 17, open interest increased by 32,031 contracts, which in relation to volume is an average increase. In the August 19 report, we discussed how Apple Computer has outperformed the S&P 500 E mini. Since generating a buy signal on July 3, our preference has been to buy Apple, rather than the E mini. Although we believe the market will levitate higher, speculators should definitely consider purchasing long puts on the S&P 500 Index or a major index of your choice. Volatility is low and as a result, the protection is inexpensive
