Soybeans:

August soybeans advanced 2.25 cents on extremely low volume of 112,517 contracts. Open interest increased by a hefty 5,813 contracts, which relative to volume is approximately 100% above average. Export sales released by the USDA for the most recent week showed that 110,600 tons were sold for the 2012-2013 season and 591,700 for the 2013-2014 season. Commitments for the entire season, which ends August 31, 2013 totals 1,355 million bushels versus USDA projected sales of 1,330 million. As this report is being compiled on July 18, August soybeans are trading 12.25 cents lower. Soybeans remain on a short and intermediate term buy signal.

Soybean meal:

August soybean meal gained $2.30 on volume of 72,200 contracts. Open interest increased by 507 contracts, which relative to volume is approximately 60% less than average. The USDA reported that 41,600 tons have been sold for the 2012-2013 season and 38,000 for the 2013-2014 season. Total commitments for the season which ends September 30, 2013 are 9,524 thousand tons versus USDA projections of 9,526 thousand tons. In short, soybeans and soybean meal are going to be very tight for at least another month. Soybean meal remains on a short and intermediate term buy signal.

Corn:

September corn lost 6.75 cents on volume of 160,027 contracts. Open interest increased by 6,661 contracts, which relative to volume is approximately 60% above average. For the most recent week, the USDA reported 152,900 tons sold for the 2012-2013 season and 1,590,800 sold for the 2013-2014 season. As this report is being compiled on July 18, September corn is trading 2.50 cents lower and has made a new low for the move at $5.32. Corn remains on a short and intermediate term sell signal.

Wheat:

September wheat lost 4.50 cents on very light volume of 59,185. Open interest declined 901 contracts, which relative to volume is approximately 40% less than average. The USDA reported that 996,400 tons were sold for the 2013-2014 season, which was a disappointment to the trade. As this report is being compiled on July 18, September wheat is trading 8.25 cents lower and has made a new low for the move at $6.56 1/2. Wheat remains on a short and intermediate term sell signal.

Cotton:

December cotton lost 70 points on very light volume of 10,053 contracts. Volume was the lightest since July 15 when 7,229 contracts were traded and cotton advanced 2 points while open interest increased 775 contracts. On July 17, open interest declined by a massive 1,654 contracts, which relative to volume is approximately 460% above average, which is an astounding number. As we said in yesterday’s report, from July 11 when corn topped out at 87.11 through July 16, December cotton had declined 3.11 cents while open interest declined a mere 46 contracts. Furthermore, we stated this was an indication that longs were digging in and refusing to liquidate, especially since the recent COT report showed managed money long cotton by a ratio of 7.05:1. Apparently on July 17, the liquidation began en masse. Although on July 18, December cotton is rallying 1.58 cents, we think it is headed lower. On June 24, cotton generated a short-term sell signal and on July 16, generated an intermediate term sell signal.

Crude oil:

August WTI crude oil gained 48 cents on volume of 692,223 contracts. Total open interest declined by 2,736 contracts, which relative to volume is 80% less than average. There were sufficient new positions initiated to offset the massive decline of open interest in the August contract of 43,083 contracts, which is about to expire. As this report is being compiled on July 18, September crude oil has advanced $1.54 and has made a new high for the move at $108.03, which is the highest price for WTI since March 23, 2012. Additionally, the spread between WTI and Brent has narrowed to near $1.00. As we have said before, the action in WTI is reflective of a change in logistics of transporting crude in United States, not an increase in absolute demand. In our view, the Brent contract reflects actual demand and the high of $109.72 made on July 16 in the August Brent contract is the upside target for WTI. WTI remains on a short and intermediate term buy signal. We discourage clients from chasing the market at current levels.

Brent crude oil:

September Brent crude oil advanced 47 cents on light volume of 485,806 contracts. Volume was the lowest since the July 4 holiday when 241,962 contracts were traded (European markets opened on July 4). If this is taken out of the equation, trading on July 17 was the lowest since June 26 when 482,221 contracts were traded. On July 17, open interest declined by 6,127 contracts, which relative to volume is approximately 45% less than average. As this report is being compiled on July 18, Brent is trading 14 cents higher versus WTI which is trading $1.59 above yesterday’s close. The high for the September Brent contract on July 18 is $108.79, which is nearly $1.00 short of the high of $109.72 made by the August Brent contract on July 16. Undoubtedly, there is heavy arbitrage activity with speculators buying WTI and selling Brent. Brent remains on a short and intermediate term buy signal, but this market should be avoided on the long side.

Heating oil:

August heating oil gained 2.43 cents on volume of 134,721 contracts. Open interest increased by 4,961 contracts, which relative to volume is approximately 50% above average. The August contract lost 2,374 of open interest, which makes the total open interest increased more impressive. On July 17, the market made a new high at $3.0782, and this has been taken out on July 18. Heating oil remains on a short and intermediate term buy signal.

Gasoline:

August gasoline lost 2.42 cents on heavy volume of 169,507 contracts. Total open interest declined by 3,888 contracts, which relative to volume is average. The August contract lost 6,663 of open interest. Gasoline remains on a short and intermediate term buy signal.

Natural gas:

August natural gas lost 4.8 cents on volume of 237,518 contracts. Open interest increased by 1,738 contracts, which relative to volume is approximately 60% less than average. The August contract lost 10,225 of open interest, which makes the open interest increase more impressive (bearish). However, on July 18, the Energy Information Administration reported there was an injection of 58 bcf into US natural gas stockpiles versus expectations of 64 bcf. As it stands as of July 18, natural gas in storage stands at 1.2% below the five-year average and 13.1% below last year at this time. During the same week last year, August natural gas traded in a range from $2.925 to 3.096. As this report is being compiled on July 18, August natural gas is trading 19.1 cents higher, which is the highest level since June 24. Natural gas remains on a short and intermediate term sell signal.

Euro:

The September euro lost 48 points on 253,508 contracts. Open interest increased by 1,372 contracts, which relative to volume is approximately 75% below average. The euro remains on a short and intermediate term sell signal.

S&P 500 E mini:

The S&P 500 E mini gained 4.25 points on light volume of 1,421,504 contracts. Open interest increased by 18,641 contracts, which relative to volume is approximately 45% less than average. As this report is being compiled, the E mini is trading 9.25 points higher and has made a new high for the move at 1688.50. We continue to advise put protection, especially for those who hold long equity positions.