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The report is late due to some technical issues.
The crop progress report will be released after the close and this will have an impact on tonight’s trading trading, which begins at 6:00 PM Central daylight time.
September soybeans closed 12.25 higher on very light volume of 169,827 contracts. Volume on Friday was the lowest since July 13 when 165,658 contracts were traded and soybeans advanced by 22.25 cents while open interest declined by 861 contracts. Also, soybean volume on August 3 declined by 18,709 contracts from August 2 when September beans declined by 15.25 cents. It is of some concern that volume declines on rallies and increases on declines. For example, on August 1, soybeans declined by 18.00 cents and volume traded was 266,281 contracts. However, on July 30, soybeans advanced 41.50 cents and volume traded was only 184,252 contracts. In a bull market, investors want to see volume expand on rallies and decline when the market declines. On August 3, open interest increased by 2,368, which in relation to volume was approximately 50% less than an average number. Until August 10, soybeans will likely trade at low volume, but as the Friday approaches we believe the market will rally. For anyone considering a short-term trade as described in the August 5 Weekend Wrap, options on grains can be used as a further way to limit risk. As I write this on August 6, September soybeans are trading 29.25 lower because of reduced temperatures and some rain that has occurred over parts of soybean growing areas.
September soybean meal gained $3.90 on very light volume of 58,232 contracts. Volume was the lowest since July 13 when 57,970 contracts were traded and soybean meal advanced by $7.40 while open interest increased 1,848 contracts. Volume has been trending lower during the past week and this should continue until the August 10 crop report. Open interest declined by 746 contracts, which in relation to volume is about 50% less than an average volume number.
September corn gained 16.00 cents on volume of 242,805 contracts. Volume declined by approximately 27,000 contracts from August 2 when corn declined 6.50 cents and open interest declined 846 contracts. Again, like soybeans, corn has developed the pattern of lower volume on rallies and higher volume on declines. This is a sign to be cautious. Open interest increased by 9,649 contracts which in relation to volume, is 50% greater than average. In other words, there are fewer participants as evidenced by low volume, but investors seem willing to commit to new positions. In the August 5 Weekend Wrap, we discussed the stratospheric level of managed money longs to shorts, which represents a high degree of speculative saturation. Please review the August 5 report on corn and take a look at the June 22 report, which outlines another possible scenario for corn.
September wheat gained 26.25 cents on volume of 111,160 contracts. Volume was approximately 10,000 contracts higher than on August 2 when wheat declined 14.50 cents and open interest declined by 2,485 contracts. Open interest increased by 3,182, which in relation to volume is average. As indicated in the August 5 Weekend Wrap, wheat open interest has been performing in a very positive manner considering the size of the decline from the high made on July 20. Hopefully, the market will continue to have a gradual slide into late August, which would provide an opportunity to establish bullish positions.
September crude oil gained $4.27 on volume of 628,855 contracts. Volume increased approximately 47,000 contracts from August 2 when gasoline declined $1.78 and open interest increased by 15,341 contracts. Volume on August 3 was the highest since July 19 when 690,954 contracts were traded and crude oil advanced $2.80 while open interest increased by 768 contracts. Friday was a classic “risk on” day with crude oil reaching its highest level since July 20 when crude reached $92.63. Open interest increased by 12,779 contracts, which in relation to volume was somewhat below average. On July 19, crude oil generated a short-term buy signal, but as of August 6 has not generated in intermediate term buy signal. For the market to get close to generating an intermediate term buy signal, crude oil will have to move significantly over $93.25, which was the high made on July 19.
September gasoline gained 6.14 cents on very low volume of 115,215 contracts. Volume was approximately 37,000 contracts less than August 6 when gasoline advanced 3.54 cents and open interest declined by 169 contracts. On on August 1, gasoline advanced 5.99 cents on low volume of 116,254 contracts while open interest increased 3,694. The pattern of low volume on the advance is of concern, but if today’s low of 2.8788 holds, an intermediate term buy signal will be generated. On August 3, open interest increased by a healthy 5,214 contracts, which in relation to volume is about 50% greater than average. On July 27, September gasoline generated a short-term buy signal. Please read the August 5 Weekend Wrap about the implications of lower ethanol production on gasoline.
September copper gained 7.70 cents on volume of 65,378 contracts volume declined by approximately 25,000 contracts from August 2 when copper fell 8.45 cents and open interest increased by 5,704 contracts. On August 3, open interest declined by 3,342 contracts, which in relation to volume is a huge decline and approximately 75% greater than average. The market continues to trade in a very bearish fashion and hopefully the market will rally to the $3.45-$3.50 level to implement bearish positions.
December gold gained $18.50 on volume of 143,035 contracts. Volume declined by approximately 29,000 contracts from August 2 when gold declined $13.00 and open interest declined by 1,901 contracts. While I think that gold has bottomed, the open interest action leaves a lot to be desired. For example, since the day that gold advanced by $31.90, open interest has declined for 7 consecutive days beginning on July 26. On July 25 gold closed at $1608.10 and on August 3 gold closed at $1606.00. From July 26 through August 3 open interest has declined by 35,558 contracts. In other words, gold lost $2.10 from July 25-August 3, but open interest fell dramatically. This is bearish open interest action considering that the decline was minor. This is not to say that gold is not going to move higher, but it is important to see gold open interest increase when the market advances and decline when gold declines. On July 27 gold generated a short-term buy signal and has not yet generated in intermediate term buy signal.
September silver gained 80.6 cents on volume of 45,025 contracts and volume actually declined by 4,413 contracts from August 2 when silver lost 54.00 cents. In other words, volume shrank nearly 9% even though the rally in silver was significantly greater than the decline on August 2. Open interest increased by 603 contracts which in relation to volume is about 50% less than average.
The September Euro gained 2.02 cents on low volume of 301,346 contracts. Volume declined approximately 178,000 contracts from the day before, when the Euro declined 63 points and open interest increased by 6,598 contracts.
S&P 500 E mini:
The S&P 500 E mini gained 27.00 points on volume of 1,949,528 contracts. Volume declined 890,185 contracts from August 2 when the S&P 500 E mini declined by 8.50 points. In other words, volume expanded on the decline and decreased on the rally. Another negative was open interest declined on August 3 by 17,755 contracts, and relative to volume the decline was significantly less than 50% of average.