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The grain complex: Watch total volume because if volume decreases as grain markets move higher, it indicates that fewer buyers are willing to pay up for ever higher prices. As a general rule, when markets stop going up, they follow the path of least resistance, and start going down.
August soybeans lost 15.75 cents on light volume of 191,596 contracts. Open interest declined by 3,124 contracts. The open interest decline in relation to volume was light and would be expected considering that soybeans have moved sharply higher on increasing open interest. As I write this on July 9, August soybeans are 44 cents higher and made a new contract high while the July contract has broken above the old all-time high of $16.63.00, and is now trading at $16.711/4, after making a new all-time high of $16.79 1/2. The market is massively overbought and to keep the rally going, soybeans need more fresh longs willing to buy at the current level. In my opinion, a likely scenario is that once new buying significantly diminishes, the market will have a massive correction. After the correction, the market attempts to rally to the old high. It either fails to do so, or moves beyond the old high by a fractional amount, and then collapses. Investors should be speaking with their investment advisor or broker about taking full or partial profits because when this market turns it could get be ugly.
August soybean meal closed $4.30 lower on very light volume of 56,300 contracts. Open interest declined by a hefty 2,001 contracts. Relative to volume, the open interest decline was heavy and significantly above average. The reason this is troubling is that soybean meal has been advancing, but open interest has been declining. For example, on Friday of last week, both soybean meal and soybeans declined by approximately 1%, yet the open interest decline was significantly more pronounced in meal. From June 25 through July 6 total open interest has declined by 7,512 contracts. During this period, soybean meal has advanced by by nearly 11%. This should make soybean meal longs nervous. Investors should consult their investment advisor or broker regarding taking full or partial profits.
September corn declined by 13.50 cents on light volume of 259,607 contracts. Total open interest increased by 3,606 contracts. For the period of July 2 through July 6, open interest has increased by 19,208 contracts. During this time, corn advanced by 66.75 cents, or 8.17%. Relative to volume (1,299,020) for the trading week, July 2-July 6, the increase of open interest was well below average. This indicates that speculators are reluctant to make strong commitments to corn. The corn rally, which began on June 18, is unparalleled going back to 1973. For some interesting historical stats on other major advances in corn, please see the July 8 Weekend Wrap. This is a market that is being driven by the weather (supply) and not by demand. I much prefer a demand driven market rather than a market based upon a supply shortage. Export sales of corn has been tepid for quite some time and at current levels, export sales should fall sharply. Additionally, with the dollar at the high end of its two-year trading range, expect this to negatively impact all grain markets. Stand aside.
September wheat lost 31.75 cents on light volume of 92,555 contracts. Open interest declined by 2,362 contracts. If you want to know what wheat is going to do, watch the corn market. There are some supply issues in Russia, Ukraine and Australia that will likely have a positive impact on wheat prices later in the year. Please review the July 8 Weekend Wrap for a historical perspective on wheat. Stand aside.
August crude oil lost $2.77 on volume of 525,487 contracts. Open interest declined by 2,682 contracts. Stand aside.
August gasoline lost 4.88 cents on very light volume of 109,912 contracts. Open interest declined by 3,204 contracts. Stand aside.
September copper lost 8.35 cents on light volume of 45,597 contracts. Open interest declined by 1,141 contracts. Stand aside.
August gold closed $30.50 lower on relatively heavy volume of 172,914 contracts. Open interest increased by 384 contracts. Investors should be talking with their investment advisor or broker regarding accumulating gold for the long-term. However, investors should be aware that if the market penetrates the $1523.90 level and closes below it, the next area support will be in the $1470 area.
September silver lost 75.2 cents on light volume of 45,444 contracts. Open interest increased by 1,134 contracts. Relative to volume, the open interest increase on the decline of silver prices was about average. At this juncture, there is no reason to be involved in silver market. Stand aside.
The September Euro lost 1.18 cents on volume of 292,099 contracts. Open interest increased by 6,849 contracts. The market made a new low for the move at 1.2271 and closed below the June 1 low. As I said in the Weekend Wrap, unless the European Central Bank is able to pull off a miracle, the Euro is likely to continue lower. Undoubtedly, there will be bursts of short covering, but until there is a fundamental change in the structure of Euroland, the currency is headed south.
S&P 500 E mini:
The S&P 500 E mini lost 9.75 points on heavier than normal volume of 1,956,619 contracts. Open interest increased by 8,870 contracts. Although the E mini is on a short and intermediate term buy signal, a long position in Apple Computer is preferable over the S&P 500 in my opinion. It appears that Apple is likely to retest its all-time high of $644.00. Please see the Weekend Wrap of July 8 for further discussion on Apple and the equity market. Consult your investment advisor or broker regarding positions in Apple Computer and maintenance or implementation of long put protection.