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Soybeans:
August soybeans closed 1 cent higher on very light volume of 183,836 contracts. Volume on Thursday was almost half of the volume on July 11 when the market declined 19 cents and volume reached 361,033 contracts. Also volume was the lowest since June 5 when 169,801 contracts traded and August soybeans closed at at $13.32 1/2. Open interest increased by 7,352 contracts, which in relation to volume is a hefty increase and significantly above average. This indicates that fresh new longs and shorts are entering the market, and and that each side has a strong opinion about the direction of soybean prices. As I have indicated in previous posts, in order for the market to move significantly higher (above $16.25), soybeans will need new buyers (speculators) and new shorts (commercials) willing to make new commitments at stratospheric prices. Obviously, it is much easier for commercials to commit to short positions at higher prices than it will be for speculators to make long commitments at higher prices. This asynchronous market dynamic between speculators and commercials will make it more difficult for the market to move higher. For soybeans, the crucial period for damage to the crop is from the mid-July to mid-August period. If temperatures cool down and/or some precipitation occurs, a setback, perhaps a significant one is more than likely. If investors have not taken profits on long positions, they should speak with their investment advisor or broker about doing so. For all others, stand aside.
Soybean meal:
August soybean meal closed $3.40 higher on light volume of 68,050 contracts. Open interest increased by 2,003 contracts. Relative to volume, the open interest increase was significantly less the the increase for soybeans, which indicates less enthusiasm for meal than soybeans by market participants. Much of what I said about soybeans is applicable to soybean meal. If investors have not taken profits, they should consult with their investment advisor or broker about doing so. Stand aside.
Corn:
September corn closed 27.25 cents higher on volume of 319,839 contracts. Open interest increased by 10,320 contracts, which in relation to volume was above average, but less than the open interest increase in soybeans, and fractionally higher than the open interest increase in meal. Open interest increased for the eighth consecutive day and now totals 89,129 contracts. The market closed at $7.31 1/4 which was a bit less than the high close of $7.32 made on July 9. The drought is proving to be one of the worst of the past three or four decades and will dramatically reduce the size of the crop. Ultimately though, on a day-to-day basis, the supply and demand for corn contracts will be the prime factor determining the direction of the futures market.
Fundamental data is very helpful by providing the big picture, but is not very helpful when determining entry and exit points. As is the case with all commodities, but especially the grain markets of today; the willingness of buyers to purchase futures contracts at higher prices and the willingness of sellers to short contracts at higher prices should be the focus of investors. Investors must keep this in mind when contemplating a position in any commodity. In yesterday’s post, I said corn would retest the high of $7.49 made on July 11. As I write this today July 13, September corn has made a high of $7.48 and is currently trading 3.50 cents higher. Stand aside.
Wheat:
September wheat closed 20.50 cents higher on volume of 116,014 contracts. Open interest increased by a whopping 8,361 contracts. Relative to volume, the open interest increase in wheat was over 50% greater than the increase in soybeans. Volume was the one component that disappointed considering the magnitude of the price and open interest increase. During June, the average daily volume for wheat was 154,518 contracts and the year to date average daily volume is 119,166 contracts. Therefore, volume on the price advance was below these important benchmarks. However, the stats just mentioned, indicate that although participation declined on Thursday’s rally, those that participated had very strong opinions about the direction of wheat prices. This is the third day in a row that open interest in wheat, relative to volume has exceeded the other grains.
It is important to note that on Thursday wheat made a new high for the move at $8.58 and a new high close at $8.46 3/4. As I write this on July 13, September wheat has made another new high at $8.65 3/4. Stand aside.
Crude oil:
August crude oil closed 27 cents higher on volume of 467,055 contracts. Open interest increased by 11,289 contracts. Relative to volume, the open interest increase was average. Stand aside.
Gasoline:
August gasoline closed 3.73 cents higher on light volume of 118,250 contracts. Open interest declined by 1,156 contracts. Although it appears that gasoline may be in the process of generating a short-term buy signal, the negative open interest action along with dismal volume makes it hard to get enthusiastic about gasoline. Stand aside.
Copper:
September copper lost 3.25 cents on light volume of 47,782 contracts. Open interest increased by 1,411 contracts. Stand aside.
Gold:
August gold lost $10.40 on heavy volume of 201,797 contracts. Open interest declined by 737 contracts. For the past three sessions, volume has ranged from a low of 176,560 contracts to the volume high on July 12. Interestingly, during the past three days, gold has declined in each of those days, which does not bode well for gold longs. Remember, volume expands in the direction of the underlying trend. If the market penetrates the low of $1523.90, it is likely that the next area support will be $1470.
Silver:
September silver gained 13.8 cents on volume of 46,113 contracts. Open interest increased by 688 contracts. Stand aside.
Euro:
The September Euro lost 26 points on light volume of 204,869 contracts. Open interest increased by 4833 contracts. The market made a new low for the move at 1.2176. Stand aside.
S&P 500 E mini:
The S&P 500 E mini lost 7.00 points on relatively heavy volume of 1,908,957 contracts. Open interest increased by 11,585 contracts. Although this is bearish open interest action in relation to price, the open interest increase in relation to volume was significantly below average. On July 12, the S&P 500 cash index generated in intermediate term sell signal. A short term sell signal has not occurred, which would be the confirming signal needed to implement bearish positions. As I have said in previous posts, I think the safest way to play the equity markets is to be long Apple Computer, whether this be in the form of an out right stock purchase, or the buying of options. Be aware that Apple will report its earnings after the close of trading on July 16. Consult with your investment advisor or broker about purchasing Apple shares or options, and whether to wait until after the earnings release before putting on positions. Also discuss the placement of stops, which is especially important if investors enter positions prior to the report.
