September soybeans advanced 23.75 cents while the November contract increased 13.50 on total volume of 217,601 contracts. Total open interest increased by a massive 14,424 contracts, which relative to volume is approximately 160% above average meaning that new longs were aggressively entering the market and pushing prices higher. Open interest increased in the September 2013 through November 2014 contracts. This is the second time during the past 3 trading sessions beginning on August 19 that prices have moved significantly higher and open interest increases have been massive. This aggressive new buying is confirming the uptrend.
The USDA released its export sales for the most recent week and it showed 20,900 tons sold for the 2012-2013 season and 925,900 tons sold for the 2013- 2014 season. As this report is being compiled on August 22, September beans are trading 3.50 cents higher while the November contract is trading 3.00 lower. The September contract has made a new high at $13.42 while the November contract has not exceeded the high of 13.19 made on August 21. Since generating a short and intermediate term buy signal in the November contract on August 19, and a short-term buy signal in the September contract, the market has only had one setback and this occurred on August 20 when the November and September contracts lost 12.75 cents. From a risk point of view, we are hesitant to recommend bullish positions at current levels because we think a setback is inevitable. It is likely that the September contract will generate an intermediate term buy signal on August 22.
September soybean meal advanced $7.70 on volume of 95,457 contracts. Total open interest increased by 4,292, which relative to volume is approximately 75% above average, meaning that new buyers were extremely aggressive and pushed prices higher. The September contract lost 580 of open interest, which makes the total open interest increase more impressive. The USDA reported that 77,400 tons were sold for the 2012-2013 season and 103,000 tons sold for the 2013-2014 season. September meal remains on a short and intermediate term buy signal, but needs to set back before bullish positions can be recommended.
September corn advanced 14.25 cents on heavier than normal volume of 258,210 contracts. Total open interest declined by 6,628 contracts, which relative to volume is average. The September contract accounted for loss of 10,507 of open interest. For the past 4 sessions beginning on August 16, open interest has declined each day, which totals 32,131 contracts while September corn has advanced 16.50 cents. This is indicative of former longs and shorts liquidating as the market moved higher. The USDA reported that 58,200 tons were sold for the 2012-2013 season and 434,400 tons sold for the 2013-2014 season. We have been actively discouraging clients from initiating bearish positions even though corn remains on a short and intermediate term sell signal. Stand aside.
September Chicago wheat advanced 4.50 cents, and KC wheat gained 2.75 on volume of 111,671 in Chicago wheat. Total open interest in Chicago wheat declined by 772 contracts, which is approximately 60% below average. The September Chicago contract lost 8,396 of open interest. The USDA reported that 494,000 tons of US wheat was sold in the most recent reporting period. Both Chicago and KC wheat remain on a short and intermediate term sell signal.
December cotton lost 4.62 cents on very heavy volume of 51,773 contracts. Volume was the heaviest since June 17 when 63,177 contracts were traded. On August 21, open interest declined by a gargantuan 12,798 contracts, which relative to volume is approximately 750% above average, meaning that liquidation was occurring at astounding levels. During the past 2 sessions December cotton has lost 8.62 cents while open interest has declined by a massive 17,189 contracts. Though the decline the past 2 days has been massive, the total open interest as of August 21 was 197,189 contracts. This figure takes total open interest back to the level of August 9th and 12th when it totaled 193,442 and 198,452 respectively and December cotton closed at 80.93 and 90.08 respectively. In short, even though cotton is trading significantly below the close of August 9 and 12, total open interest is above or slightly below levels of August 9 and 12. Clearly, more liquidation is ahead. Cotton will generate a short-term sell signal on August 22, but will not generate an intermediate term sell signal.
October live cattle lost 17 points on low volume of 26,599 contracts. Total open interest increased by 967 contracts, which relative to volume is approximately 40% above average, meaning that although longs and shorts were aggressive new entrants, they were unable to move the market significantly. The August contract accounted for loss of 436 of open interest. As this report is being compiled October cattle is trading 55 points lower. We are waiting for a further setback before recommending bullish positions.
October crude oil lost $1.26 on volume of 573,321 contracts. Total open interest declined by 12,591 contracts, which relative to volume is approximately 15% below average, but a healthy number nonetheless. The September contract lost 559 of open interest. Despite the move lower over the past couple of days, crude oil has not yet generated a short or intermediate term sell signal. However, we had recommended that clients write out of the money calls on August 16. This trade has been working well and we recommend that clients continue to hold the position. However, with chemical weapons being used in Syria, it is questionable whether the United States and the West will be able to standby much longer without taking military action. This will have the predictable effect of boosting oil prices temporarily.
September natural gas advanced 1.6 cents on volume of 241,908 contracts. Total open interest declined by 7,349 contracts, which relative to volume is approximately 20% above average. The September contract accounted for loss of 16,026 contracts. The Energy Information Administration announced that stocks of natural gas increased by 57 bcf, which is 7.2% below year ago levels. As this report is being compiled on August 22, natural gas is trading 8.2 cents higher and has made a new high for the move at 3.559. Natural gas remains on a short and intermediate term sell signal.
December gold lost $2.50 on volume of 161,601 contracts. Open interest declined by 3,629 contracts, which relative to volume is approximately 10% below average. Gold remains on a short term buy signal, but an intermediate term sell signal. We want to watch gold further to determine a reasonable entry point.
September silver advanced 10.8 cents on volume of 62,952 contracts. Open interest increased by 321 contracts, which relative to volume is approximately 75% below average. Like gold, we want to watch silver before recommending bullish positions. Silver remains on a short and intermediate term buy signal. We want to see a healthy pullback before recommending bullish positions.
The September euro lost 45 points on volume of 221,501 contracts. Open interest declined by 5,809 contracts, which relative to volume is average. It is healthy to see open interest decline when the market pulls back, and as we stated in yesterday’s report, the massive open interest build of 12,178 on August 20 contracts was the catalyst to recommend that clients take full or partial profits. At this juncture, our concern is if there is a spike in long-term interest rates, it would send the dollar sharply higher and the components of the dollar index sharply lower. Stand aside.
S&P 500 E mini:
The S&P 500 E mini lost 14.00 points on heavier than normal volume of 2,130,523 contracts. Volume was the highest since August 15 when 2,408,334 contracts were traded and the E mini lost 26.25 points while open interest increased 26,827 contracts. On August 21, open interest increased by a hefty 43,255 contracts, which relative to volume is approximately 20% below average, but a healthy increase nonetheless. Since August 15, the E mini has been displaying a consistent pattern of bearish price and open interest action. If clients are long puts continue to hold these and if not, we recommend they be initiated immediately.
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