On July 29, Apple Computer generated a short and intermediate term buy signal. This is the first short and intermediate term buy signal since Apple began its decline on September 21, 2012.
September soybeans lost 3.25 cents on volume of 154,967 contracts. Total open interest declined by 4,767 contracts, which relative to volume is approximately 20% above average. The August contract accounted for loss of 6,332 of open interest. Soybeans remain on a short and intermediate term sell signal, and as this report is being compiled on July 30, September soybeans are trading 23.75 cents lower, and have made a new low for the move at $12.47 1/4. Although soybeans are on sell signals, we discourage clients from initiating new short positions at current levels.
September soybean meal gained $7.50 on volume of 72,336 contracts. Open interest declined by 5,431 contracts, which relative to volume is approximately 200% above average, meaning that liquidation was extraordinarily heavy on the advance. The August contract accounted for loss of 6,196 of open interest. We still think it is possible that soybean meal may take another run at the highs, and contrary to soybeans, meal remains on a short and intermediate term buy signal.
September corn lost 2.75 cents on volume of 182,243 contracts. Total open interest increased by 275 contracts, which is minuscule and dramatically below average. The September contract lost 5,420 of open interest. Corn remains on a short and intermediate term sell signal, and as we have said before, we discourage new shorts from entering the market at current levels. Weather related rallies are common at some point in the growing season, and the market needs a good short covering rally before new bearish positions should be considered.
September wheat gained 1.25 cents on volume of 57,107 contracts. Total open interest increased by 1,498 contracts, which relative to volume is average. The September contract accounted for loss of 1,477 of open interest. We continue to think that wheat is a turn around story, and with managed money heavily net short, this will add additional fuel to the rally. There are some quality issues with French wheat, but US wheat needs to become more competitively priced on the world market. Wheat remains on a short and intermediate term sell signal.
December cotton lost 41 points on volume of 11,138 contracts. Open interest increased by 170 contracts, which relative to volume is approximately 40% below average. The open interest increase relative to volume is the lowest that we have seen in many weeks. Maintain bearish positions with an exit point slightly above 87.11. We think cotton is headed lower and will eventually test the 78 cent level.
October live cattle gained 12 points on volume of 34,296 contracts. Total open interest increased by 1,131 contracts, which relative to volume is approximately 35% above average. The August contract accounted for loss of 2,079 contracts. Cattle continues to trade in a sideways pattern and we are waiting for a breakout to the upside. Cattle remains on a short and intermediate term buy signal.
September crude oil lost 15 cents on very light volume of 428,816 contracts. Open interest increased by 712 contracts, which is minuscule and dramatically below average. As we said in yesterday’s report, since July 19 when September crude made a high of $108.93, WTI has been trading consistently lower with lower highs and lower lows. As this report is being compiled on July 30, crude oil is trading $1.56 lower and has made a new low for the move at $102.67, which is the lowest price for September crude since July 9 when September crude made a low of $102.21.
From July 9 through July 19 when September crude made its high, open interest increased by 34,874 contracts. From July 19 through July 29, open interest has declined a total of 15,549. In short there remains a significant amount of speculative money that is long at higher levels. To corroborate this, consider that on July 9, which was the tabulation date of the COT report, the long to short ratio of managed money was 9.34:1 and as of the latest COT report tabulated on July 23, managed money was long by a ratio of 11.16:1. This figure is among the highest seen during the past 2 years when crude oil was trading at approximately the same level as it is today. The fundamentals for crude are terrible, and it is readily apparent to just about everyone in the financial world that the economic situation in China is rapidly deteriorating. Despite the move lower, WTI remains on a short and intermediate term buy signal.
September natural gas lost 9.1 cents on heavy volume of 339,804 contracts. Volume was the highest since July 18 when 469,170 contracts were traded and September natural gas closed at $3.810. On July 29, total open interest increased by 4,422 contracts, which relative to volume is approximately 45% less than average. The August contract lost 6,700 of open interest. September natural gas forged a new low for the move at $3.427, which is its lowest price since February 19 when September natural gas made a low of $3.420. On the natural gas continuation chart, support should be found at $3.180, which was the low for the front month on February 14, 2013.
S&P 500 E mini:
The S&P 500 E mini lost 4.00 points on light volume of 1,103,655 contracts. Open interest declined by 1,708 contracts, which is minuscule and dramatically below average. We continue to encourage clients to hedge themselves by buying long puts in the E mini, especially if they hold long equity positions.