September soybeans advanced 8.50 cents on volume of 178,824 contracts. Total open interest declined by 11,998 contracts, which relative to volume is approximately 160% above average meaning that liquidation was extraordinarily heavy. The August contract accounted for loss of 8,663 of open interest. September soybeans generated a short and intermediate term sell signal on July 25. As this report is being compiled, September beans are trading 9.75 cents lower. Although, normally we would be recommending bearish positions once we saw a rally in soybeans lasting 1-2 and possibly 3 days, our concern is that the crucial growing season is ahead, and speculators are getting increasingly bearish on the grain complex.
September soybean meal gained $6.30 on heavy volume of 105,903 contracts. Total open interest declined by 6,603 contracts, which relative to volume is approximately 140% above average. The August contract lost 5,293 of open interest. Even with the most recent pullback, soybean meal remains on a short and intermediate term buy signal, while soybeans are on a short and intermediate term sell signal. It appears that soybean meal may take another run at the highs, though we doubt it will take out the high made in the August contract of $521.00.
September corn lost 4 cents on volume of 176,979 contracts. Total open interest declined by 3,778 contracts, which relative to volume is approximately 20% below average. Corn is trading below $5.00 for the first time since October 2010, and as this report is being compiled on July 29, corn has made a new low for the move at $4.88 1/4. We think it is unwise to chase corn at current levels, and a short covering rally brought on by a change in the weather is likely at some point. This would be the circumstances under which bearish positions could be initiated.
September wheat gained 1 cent on volume of 63,448 contracts. Open interest declined by 1,682 contracts, which relative to volume is average. Aside from soybean meal, we believe wheat may surprise to the upside, and with a high level of managed money shorts, the rally could turn into a short-term buy signal. As it stands, wheat remains on a short and intermediate term sell signal.
December cotton lost 87 points on volume of 14,726 contracts. Volume was the highest since July 23 when 14,942 contracts were traded. Open interest declined by 233 contracts, which relative to volume is approximately 35% less than average. Managed money continues to hold a substantial net long position, and we think that this will add fuel to the fire on the downside. Cotton remains on a short-term sell signal, but an intermediate term buy signal.
October live cattle gained 35 points on volume of 40,937 contracts. Total open interest increased by 381 contracts, which relative to volume is approximately 50% less than average. The August contract accounted for loss of 3,507 of open interest. Cattle remains on a short and intermediate term buy signal, but has been trading in a sideways pattern ever since the signals were generated. We want to see cattle move up to 1.2700 before recommending bullish positions.
September crude oil lost 79 cents on very low volume of 408,010 contracts. Open interest declined by 16,302 contracts, which relative to volume is approximately 55% above average meaning that liquidation was fairly heavy. Managed money is long at stratospheric levels and, since July 19 when September crude made its high at $108.93, there have been a succession of lower highs and lower lows. This has continued into the trading session of July 29, and bodes ill for anyone long this market. From a fundamental point of view we’ve never been bullish on crude, and the move higher has been changes in logistics and the unwinding of spreads. Crude remains on a short and intermediate term buy signal.
September natural gas lost 8.4 cents on volume of 291,482 contracts. Open interest declined by 10,546 contracts, which relative to volume is approximately 40% above average meaning that liquidation was fairly heavy. The August contract accounted for loss of 10,336 contracts. Additionally, the August contract’s 50 day moving average has crossed below the 150 and 200 day moving averages. As this report is being compiled on July 29, September natural gas has made a new low at $3.427, which is its lowest price since February 2013. For a while, it appeared that natural gas had found a bottom, especially since it tends to bottom seasonally in July and then rise through the fall. Natural gas has been on a short-term sell signal since May 31 and an intermediate term sell signal since June 24.
The September euro gained 33 points on very light volume of 154,307 contracts. Open interest declined by 1,049 contracts, which relative to volume is approximately 65% below average. The euro made a new high at 1.3300, which takes it to the June high of 1.3423. Please review the June 28 Weekend Wrap for more information on the euro and other currencies comprising the dollar index.
S&P 500 E mini:
The S&P 500 E mini gained 2.50 points on volume of 1,403,552 contracts. Open interest declined by a minuscule 409 contracts. We continue to advise long put protection, especially for those holding long equity positions.