Soybeans:

September soybeans lost 14 cents on volume of 132,619 contracts. Total open interest increased by 2,238 contracts, which relative to volume is approximately 30% less than average. The August and September contracts lost a total of 519 of open interest, which makes the total open interest increase more impressive (bearish). During the past 2 days, September soybeans have declined 19.25 cents while open interest has increased 4,222 contracts, which is bearish open interest action relative to the price decline. It is important to remember that managed money is long soybeans by nearly a 3 to 1 ratio, which means until the ratio declines significantly, there is more liquidation ahead.

Soybean meal:

September soybean meal lost $5.50 on volume of 60,754 contracts. Open interest increased by 2,335 contracts, which relative to volume is approximately 50% above average. The August and September contracts lost a total of 1,156 of open interest, which makes the total open interest increase more impressive (bearish). From July 31 through August 6, which is the COT tabulation time frame, and will be released this coming Friday, soybean meal has been underperforming soybeans by wide margin. For example, September meal is down 8.29% while September beans are down 4.44%. On August 5, soybean meal generated a short and intermediate term sell signal.

Corn:

September corn gained 3 cents on volume of 231,875 contracts. Total open interest increased by 2,274 contracts, which relative to volume is approximately 50% below average. The September contract lost 8,180 of open interest, which makes the total open interest increase more impressive (bearish). For the past 4 days beginning on August 1, open interest has increased every day and totals 13,094 contracts while corn prices have declined 26.75 cents. This is bearish open interest action relative to the price decline, and it confirms the downtrend. As we’ve said before, speculators must be cautious at current levels, because the market is likely to have a technical rally at any time. The growing season is nowhere near complete, and it might not take much to move corn higher. Corn remains on a short and intermediate term sell signal.

Wheat:

 September wheat gained 5.25 cents on volume of 95,735 contracts. Open interest declined by 1,323 contracts, which relative to volume is approximately 40% less than average. The September contract lost 2,121 of open interest. As this report is being compiled, September wheat is trading 8.25 cents lower and is made a new low for the move at $6.39. Wheat remains on a short and intermediate term sell signal.

Cotton:

December cotton gained 49 points on light volume of 11,306 contracts. Open interest increased by 314 contracts, which relative to volume is average. As this report is being compiled on August 7, December cotton is trading 1.99 cents higher on heavy volume and has taken out our exit point for bearish positions at 86.55. Additionally, December cotton is taken out the July 11 high of 87.11 and is trading at the highest level since June 18 when December cotton made a high of 88.87. We were recommending bearish positions at the 86 cents level, and with bearish positions having been exited at approximately 86.55, the loss on positions has been minor. Clients should be on the sidelines, although it is a certainty that cotton will generate a short and intermediate term buy signal on August 7.

From the August 2 report:

“Cotton continues to trade in a sideways movement, and we are expecting the market to move lower, however due to declining stocks, we could see a move sharp higher temporarily. This is why we have advocated the exit of bearish positions at or slightly above 86.55 which was the high on July 23.”

Live cattle: On August 6, October cattle generated a short-term sell signal, and on August 5 generated an intermediate term sell signal.

October live cattle gained 12 points on light volume of 29,043 contracts. Total open interest increased by 742 contracts, which relative to volume is average. The August contract accounted for loss of 1,334 of open interest. On August 5, October cattle generated an intermediate term sell signal and now that cattle is on a short-term sell signal, we have further validation of the short call position recommended in the August 1 report.

Crude oil:

September crude oil lost $1.26 on light volume of 543,412 contracts. Total open interest increased by 6957 contracts, which relative to volume is approximately 45% less than average. The September contract accounted for loss of 16,009 of open interest, which makes the total open interest increase more impressive (bearish). During the past 3 days, crude oil has declined $2.59 while open interest has increased by 18,169 contracts. While this is bearish open interest action relative to the price decline, the increase itself is rather minor considering it occurred over a period of 3 days. Additionally, the fact that there was minor liquidation on the decline indicates that market participants who are holding long positions are digging in. Since managed money is long crude oil by a ratio of 10.61:1, the market is highly vulnerable to a downside break. The Energy Information Administration said that crude oil stocks declined by 1.3  million barrels. Interestingly the market’s reaction to the decline in stocks is a continued decline with September crude trading $1.07 lower. The contract has made a new low at $104.20. Crude oil remains on a short and intermediate term buy signal, but we discourage clients from trading the market on the long side.

Natural gas:

September natural gas closed unchanged on volume of 189,877 contracts. Total open interest increased by 6,183 contracts, which relative to volume is approximately 30% above average. The September and October contracts lost a total of 954 of open interest. As this report is being compiled on August 7, September natural gas is trading 6.2 cents lower and has made a new low for the move at 3.239, which takes out the low on August 6 of 3.301. Natural gas remains on a short and intermediate term sell signal.

Euro:

The September euro gained 46 points on volume of 197,286 contracts. Open interest increased by 2,137 contracts, which relative to volume is approximately 50% less than average. The open interest increase on August 6 was the largest since July 31 when the euro gained 73 points and open interest increased by 4,660 contracts on volume of 336,390 contracts. This was the day the euro made its high of 1.3347. As this report is being compiled on August 7, the September euro is trading 35 points higher and has made a high of 1.3345, which is 2 points shy of the high for July 31. On July 22, the September euro generated a short and intermediate term buy signal. The market looks very firm.

Japanese yen: On August 6, the September Japanese yen generated a short and intermediate term buy signal.

The September yen advanced 69 points on volume of 131,949 contracts. Open interest declined by 717 contracts, which relative to volume is approximately 70% less than average. From August 2 when the rally began through August 6, open interest has declined 3,047 contracts while the September yen has advanced 192 points or 1.9%. As this report is being compiled on August 7, the September yen is trading 122 points higher and has made a new high for the move at .010373. Managed money is short at the highest levels of the past 3 weeks, and it is one of the highest net short positions during the past couple of months. This will add fuel to the rally. As is usually the case after the generation of buy signals, there should be a pullback lasting from 1-3 days. After this, we expect the rally to continue.

S&P 500 E mini:

The S&P 500 E mini lost 8.50 points on volume of 1,277,817 contracts. Open interest increased by 7,806 contracts, which relative to volume is approximately 65% below average. As this report is being compiled on August 7, the September E mini is trading 7.75 points lower and has made a new low for the move at 1680.50. We think the market is headed lower, and we strongly encourage those who hold equity positions to initiate long put protection.