E-mail comments and questions to: garry@openinterestanalyst.com
Today, August 3, is a “risk on” day with the dollar sharply lower, equities and the petroleum complex sharply higher.
Soybeans:
September soybeans closed 15.25 cents lower on light volume of 188,536 contracts. Volume declined by 77,745 contracts from August 1 when soybeans closed 18.00 cents lower and open interest increased by 1,016 contracts. The low on August 2 was $16.01 1/4, which was fractionally below the previous day’s low of $16.02 1/4. On August 2, open interest declined by a mere 689 contracts, which is positive considering the size of the price decline. Relative to volume, the open interest decline was significantly less than average The market continues to trade in a sideways to lower pattern and this should continue until perhaps Tuesday when a turnaround is likely due to the August 10 USDA report. The crop progress report will be issued this coming Monday after the close and could begin to add fuel to the bullish fire. The crop is entering its very critical stage and demand has been terrific even at current lofty prices. Please be sure to review the upcoming Weekend Wrap about a possible short-term trade with low risk that can be placed prior to the report.
Soybean meal:
September soybean meal closed $6.50 lower on extremely light volume of 63,218 contracts. Volume was the lowest since July 13 when 57,970 contracts were traded and soybean meal closed $7.40 higher while open interest increased by 1,848 contracts. The market continues to trade in a sideways to lower pattern on fairly low volume that has not been over 100,000 contracts since July 25. From July 26 through August 2 September soybean meal has lost $3.30.
Corn:
September corn closed 6.50 cents lower on volume of 269,828 contracts. Volume on August 2 declined by 52,525 contracts from August 1 when corn declined 6.00 cents and open interest declined by 9,101 contracts. On August 2, open interest declined by a very meager 846 contracts,, which in relation to volume is extremely low. Since topping out on July 20 at $8.28 3/4, corn has been trading in a sideways to lower pattern and this should continue until Monday. The crop progress report is issued every Monday after the close, and could begin to add some additional speculative enthusiasm. For the most part the market has priced in an abysmal crop, and as we move forward, the focus will be on the demand side of the equation. As pointed out in the July 29 Weekend Wrap, the high in corn on July 20 was only 29.00 cents above the high made on June 10, 2011 of $7.99 3/4. As a consequence, the market may have trouble making a move significantly above its all-time high.
Wheat:
September wheat closed 14.50 cents lower on volume of 101,116 contracts. Volume decreased by approximately 4,000 contracts from August 1 when wheat closed 8.75 cents lower and open interest declined by 3,197 contracts. It is positive to see open interest decline along with price, and wheat has been acting as well or better than corn. Wheat has been following corn for the most part, but occasionally has shown some independent strength. For example on August 3 wheat is trading 3.32% higher while corn is trading 2.2% higher. If wheat trades lower in the next couple of weeks, a terrific opportunity will be presented to get long.
Crude oil:
September crude oil lost $1.78 on volume of 581,707 contracts. On August 2 volume increased by approximately 40,000 contracts from the day before when crude oil gained 85 cents and open interest increased by 6,328 contracts. Additionally, volume was the highest since July 19 when 690,954 contracts were traded and crude oil closed $2.80 higher while open interest increased by 768 contracts. On July 31, September crude oil lost $1.72 and the range for that day was $2.99 while volume was 521,322 contracts. On August 2, crude oil closed down $1.78 and the day’s range was 2.71 or less than 28 cents than the range on July 31, yet volume increased by 41,408 contracts on August 2. On July 31, the low in crude was $87.31 and on August 2, the low was $86.92 meaning that the two trading days had much in common in terms of range, size of price decline, and daily low. However, volume on August 2 increased by 60,385 contracts from July 31 on the price decline, which is not positive.
On August 2, open interest increased by 15,341 contracts which in relation to volume was an average increase. From a bullish point of view, it would have been preferable to see open interest decline on August 2, especially since there was an open interest build during the previous several days. As this report is being written on August 3, September crude oil is trading $4.30 higher. The dollar index undergoing a massive decline, which in great part is due to the rally in the Euro. Additionally the markets have interpreted the employment report positively, which is contributing to the sharp move upward. Crude oil generated a short-term buy signal on July 19, but remains on an intermediate term sell signal.
Gasoline:
September gasoline closed 3.54 cents higher on volume of 152,209 contracts. On August 2, volume increased by approximately 36,000 contracts from August 1 when gasoline advanced 5.99 cents and open interest increased by 3,694 contracts. Additionally, volume was the highest since July 25 when 180,498 contracts were traded and gasoline declined by 0.96 while open interest declined by 4,963 contracts. On August 2, open interest declined by 169 contracts, which in relation to volume is a minuscule decline. September gasoline made a new high for the move at $2.8934, which was the highest price since May 4 when September gasoline reached $2.9201. As indicated in prior reports, price action action during the past couple of weeks has been positive, but this has been contradicted by declining open interest on low volume. On July 16, gasoline generated a short-term buy signal, and on July 24 generated in intermediate term sell signal. As of August 3, gasoline has not generated an intermediate term buy signal. However, this could occur next week.
Copper:
September copper closed 8.45 cents lower on extremely heavy volume of 90,793 contracts. On August 2, volume was much higher than July 20 when 80,729 contracts were traded and copper declined by 8.65 cents while open interest declined by 3,632 contracts. On August 2, open interest increased by 5,704 contracts, which in relation to volume is a huge increase and more than double an average increase. On August 3 as this report is being written, September copper is trading 7.20 cents higher on a “risk on” day. If this continues into next week, perhaps there will be an opportunity to implement bearish positions in copper.
Gold:
December gold closed $13.00 lower on volume of 172,751 contracts. On August 2, volume declined by approximately 2,200 contracts from August 1 when gold declined $7.30 and open interest declined 6,625 contracts. On August 2, open interest declined by 1,901 contracts which in relation to volume is significantly below average. Although the dollar is sharply lower, the S&P 500 E mini and the petroleum complex is sharply higher, gold is trading 1.02% higher or $16.30. This is a disappointing performance. Gold clearly has more backing and filling to do, but it remains on a short-term buy signal and an intermediate term sell signal.
Silver:
September silver closed 54 cents lower on volume of 49,438 contracts. On August 2, volume was a couple of hundred contracts above August 1 when silver declined by 37.9 cents and open interest increased by 1,576 contracts. On August 2, open interest increased by 515 contracts. The market continues to act poorly. Stand aside.
Euro:
The September Euro lost 63 points on extremely heavy volume of 479,233 contracts. Volume was the highest since June 13, 2012 when 527,443 contracts were traded and the Euro closed 77 points higher while open interest increased by 33,427 contracts. The range on August 2 was 2.54 cents which is about twice the 21 day average true range of 1.277. As this report is being compiled on August 3 the September Euro is trading 1.96 cents higher. Stand aside.
S&P 500 E mini:
The S&P 500 E mini closed 8.50 points lower on extremely heavy volume of 2,839,713 contracts. Volume on August 2 was higher than June 21 when 2,714,669 contracts were traded and the E mini declined by 32.50 points while open interest increased 30,014 contracts. Additionally, volume on August 2 was the highest since June 14 when 3,294,063 contracts were traded and the E mini closed 17.50 points higher while open interest increased by 10,262 contracts. Although volume surged on August 2, so did open interest by increasing a massive 73,282 contracts. Relative to volume, the open interest increase was average, but it is somewhat unusual to see open interest increase or decrease by an average amount in the S&P 500 E mini. The massive increase in open interest on the price decline, along with a heavy increase of volume is bearish. Despite the S&P 500 E mini being on a short and intermediate term buy signal, it is difficult to get enthusiastic about the long side at current levels. Based upon last week’s sentiment numbers from the American Association of Individual Investors, and the relatively high short interest ratio on the New York Stock Exchange, this market has the look and feel of a short covering rally. As this report is being compiled on August 3, the S&P 500 E mini is trading 27.25 points higher on volume of 1,517,668 contracts, which is significantly less volume than on August 2. As mentioned many times before, the preferred position is to be long Apple Computer.
