September soybeans lost 23 cents on volume of 157,771 contracts. Surprisingly, volume was only approximately 3000 contracts above trading on July 29 when soybeans lost 3.25 cents and open interest declined 4,767 contracts. On July 30, open interest declined only 487 contracts, which is minuscule and dramatically below average. August soybeans lost 4,436 of open interest. September beans made a new low for the move at $12.47 1/4. As this report is being compiled on July 31, September soybeans have made another new low at $12.37 1/4. Soybeans remain on a short and intermediate term sell signal.
September soybean meal lost $6.30 on volume of 73,687 contracts. Total open interest declined 2,737 contracts, which relative to volume is approximately 40% above average, meaning that liquidation was unusually heavy. The August contract accounted for loss of 2,603 of open interest. Though soybeans have been making new lows, this is not the case with soybean meal, which made its low at $389.00 on July 26. We think it is quite possible there will be another run at the highs in the September contract. Soybean meal remains on a short and intermediate term buy signal.
September corn gained 6.25 cents on volume of 199,712 contracts. Total open interest declined by 806 contracts, which is minuscule and dramatically below average. The September contract lost 4,265 of open interest. Despite the bearish look of the charts and the negative fundamentals, corn is in its critical growing period, and occasional weather scares are likely to occur at this time, which could cause a spate of short covering. Once this takes place, it would be the ideal time to initiate bearish positions. Corn remains on a short and intermediate term sell signal.
September wheat gained 3.75 cents on heavier than normal volume of 100,187 contracts. Volume increased approximately 43,000 contracts from July 29 when September wheat gained 1.25 cents and open interest increased by 1,498 contracts. Additionally, volume was the highest since July 11 when 117,233 contracts were traded and open interest increased by 419 contracts while September wheat advanced 4 cents. We are favorably inclined towards wheat, and think it is in the process of making a bottom. As this report is being compiled on July 31, September wheat is trading 7.50 cents higher and has made a new high for the move at $6.65 3/4, which is its highest price since July 22 when wheat made a high of $6.67 3/4. Wheat remains on a short and intermediate term sell signal.
December cotton gained 43 points on light volume of 13,905 contracts. Open interest increased by a massive 2,200 contracts, which relative to volume is approximately 410% above average meaning that new buyers and sellers were aggressively initiating new positions at extraordinarily high levels, but longs had the edge and were only able to move cotton prices fractionally higher. On the fundamental side, cotton stocks held for delivery against futures contracts have fallen to 152,457 bales, which is down 600,000 bales since the beginning of July. Apparently there are quality concerns about the current crop and cotton mills are making sure that they have adequate supplies. Although this has not affected futures prices as yet, if the drawdown continues, we could see a spike in prices, which would probably be temporary in nature. Previously, we have advised clients to maintain buy stops slightly above the July 11 high of 87.11. In order to mitigate the risk inherent in a possible price spike, we suggest that exit points for bearish positions be lowered to the 86.55 level, which was the high on July 23.
October live cattle lost 32 points on volume of 44,292 contracts. Total open interest increased by 2,051 contracts, which relative to volume is approximately 75% above average meaning that new longs and shorts were entering the market at a very aggressive pace, but shorts were unable to drive prices more than fractionally lower. The August contract lost 1,122 of open interest, which makes the total open interest increase more impressive. The market continues to trade in its sideways pattern and we are waiting for an upside breakout. Cattle remain on a short and intermediate term buy signal.
September crude oil lost $1.47 on light volume of 546,596 contracts. Total open interest increased only 294 contracts, which is minuscule and dramatically below average. The September contract lost 6,552 of open interest. The Energy Information Administration released its stocks report and there was a build of 431,000 barrels. From July 19 through July 30, open interest has declined a total of 15,255 contracts while September crude oil has lost $4.73. Speculators are clearly not liquidating on the pullback and it appears likely they are increasing their long positions. As this report is being compiled on July 31, September crude oil is trading $1.71 higher, and this is the first day that the high for the day has been higher, and the low has been higher. We remain skeptical of WTI taking out the July 19 high of $108.93. Additionally, we think the equity market is likely to undergo a correction, perhaps a severe one. September crude oil remains on a short and intermediate term buy signal.
September natural gas lost 4 cents on volume of 217,595 contracts. Open interest increased by 711 contracts, which is minuscule and dramatically below average. The August and September contracts lost 4,109 of open interest. Natural gas remains on a short and intermediate term sell signal.
The September euro lost 2 points on volume of 184,358 contracts. Open interest increased by 2,365 contracts, which relative to volume is approximately 45% less than average. The euro made a new high at 1.3305, and as this report is being compiled on July 31, September euro is trading 21 points higher and has made a new high of 1.3340. Ever since generating a short and intermediate term buy signal on July 22, the biggest pullback has been 40 points on July 24. Usually, after a buy signal is generated, the market pulls back from 1 to 3 days, and the fact this is not occurred is testament to the strength in the euro. It is overbought, but with a large number of managed money shorts, the market can stay overbought longer than usual. We discourage clients from entering new long positions at current levels, and would prefer to see the euro setback near to 1.3100.
S&P 500 E mini:
The S&P 500 E mini gained 2.25 points on volume of 1,321,237 contracts. Open interest increased by 6,620 contracts, which is minuscule and dramatically below average. The last major increase of open interest occurred on July 25 when it increased by 31,539 contracts while the E mini advanced 0.25 points on that day. From July 26 through July 30 the E mini has gained 0.75 points while open interest has increased only 4,503 contracts even though the market has made higher highs than on July 25. We are leery about the long side of this market and have been for quite some time. Clients should have long put protection, especially for those that hold long equity positions.