E-mail comments and questions to: garry@openinterestanalyst.com 

Please note: On July 11, the USDA will issue its monthly supply demand report. Due to the Fourth of July holiday, the Commitment of Traders Report was issued after the close on Monday. The data was tabulated last Tuesday and covers the period from June 27-July 3.

General Comments: Overall, the volume in the grain markets was below what would be expected considering the magnitude of the moves. I will get into specifics for each commodity, but as I said in the Weekend Wrap of July 8, and subsequently in the post of July 6, grain markets need additional new buyers at lofty levels in order to continue to move higher. Because commercials rarely buy at the top of markets, the fuel for an additional rally will have to come from speculators. The lackluster volume is indicative of a reduced amount of activity by market participants. Markets correct, or move into longer duration downtrends because of an absence of buyers at the top of the trading range.

Soybeans:

The Commitment of Traders Report showed in the managed money category, speculators added 11,416 contracts to their long positions and liquidated 526 contracts of their short positions. Commercial interests liquidated 6,151 contracts of their long positions and added 14,162 contracts to their short positions. Managed money speculators are long by a ratio of 39.2 to 1.

August soybeans gained 39.50 cents on disappointing volume of 247,742 contracts. Total open interest increased by only 890 contracts. The open interest action in relation to the size of the move was abysmal. Volume on Monday was only 15,000 contracts above  232,744, which was the average daily volume for June. Year-to-date average daily volume for soybeans is 213,175 contracts. August soybeans made a new contract high of $16.25 1/2 and the July contract made a new all-time high of $16.79 1/2. Despite the powerful move higher, the degree of participation was disappointing and the pitiful open interest increase showed a lack of commitment by market participants. As I write this on July 10, August soybeans are trading 12 cents lower. Investors should consult their investment advisor or broker about taking profits.

Soybean meal:

The Commitment of Traders Report showed in the managed money category, speculators liquidated 5,737 contracts of their long positions and also liquidated 992 contracts of their short positions. Commercial interests liquidated 3,467 contracts of their long positions and also liquidated 5,296 contracts of their short positions. It was surprising to see both managed money and commercials liquidate their long and short positions, especially because the market had moved significantly higher during the reporting period. During the time frame of the COT report, which began on June 27, soybeans moved from $414.50 to close at $447.20 on July 3. The market action combined with the liquidation by commercials and managed money is very troubling and soybean meal longs should take the liquidation seriously. Despite the liquidation, the long to short ratio of managed money remains at the stratospheric level of 60 to 1. The reason for this is, the number of shorts that liquidated represented a significantly greater percentage of total short interest than did the number of longs as a percentage of long open interest.

August soybean meal closed $12.50 higher on volume of 77,546 contracts. Open interest declined by 3,418 contracts. Relative to volume, the open interest decline on July 9 was greater than the open interest decline on July 6. In other words, a greater percentage of liquidation occurred on July 9 than on July 6, even though the market moved to a new contract high and a new all-time high ($479.30). The volume on Monday was disappointing as well and it was significantly below June’s average daily volume of 86,291 contracts. The average daily volume on a year to date basis is 74,762 contracts.

From June 25 through July 9, total open interest has declined by 10,930 contracts while soybean meal has advanced by $54.30 or approximately 13%. When you take into account last week’s data from the Commitment of Traders Report and the  open interest decline of 10,930 contracts during the advance, it is apparent that massive liquidation is occurring. Although it hasn’t manifested itself  in lower prices, investors should not be waiting around to find out. If long soybean meal, investors should be talking to their investment advisor or broker regarding taking profits.

Corn:

The Commitment of Traders Report showed in the managed money category, speculators added 14,660 contracts to their long positions and liquidated 46,335 contracts of their short positions. Commercial interests liquidated 10,062 contracts of their long positions and added 46,874 contracts to their short positions. The action of commercials and managed money was totally opposite. Managed money is long by a ratio of 5 to 1. Although I haven’t done the research on it yet this is probably the highest ratio of longs to shorts by managed money speculators in quite a while.

September corn closed 36.75 cents higher on volume of 349,517 contracts. Open interest increased by a massive 34,097 contracts. Although the open interest increase was massive in relation to volume, total volume was disappointing to say the least. For example, during the month of June average daily volume was 382,236 contracts and average daily volume year to date is 331,186 contracts. During the past four sessions, open interest has increased by 56,396 contracts, which relative to volume is an extremely healthy and an above average number. During this time, corn has advanced 79.75 cents. The market made a new high for the move at $7.35 1/4 and stayed at limit up for part of the session. As everyone knows, we are dealing with a weather market and anything can happen. The best that one can do at this juncture is to stand aside and let the market find its level of support.

Wheat:

The Commitment of Traders Report showed in the managed money category, speculators added 4,884 contracts to their long positions and liquidated 9,459 contracts of their short positions. Commercial interests liquidated 1,435 contracts of their long positions and added 8,444 contracts to their short positions. 

September wheat closed 22 cents higher on light volume of 92,316 contracts. Open interest increased by a minuscule 706 contracts. Wheat was the underperformer on Monday and its high of $8.44 3/4 was only fractionally above the old high of $8.40 3/4 made on July 5. Stand aside.

Crude oil:

The Commitment of Traders Report showed in the managed money category, speculators added 10,322 contracts to their long positions and liquidated 3811 contracts of their short positions. Commercial interests added 5,983 contracts to their long positions and also added 7,339 contracts to their short positions. Managed money speculators are long by a ratio of 2.66 to 1.

August crude oil gained $1.54 on light volume of 474,076 contracts. Open interest declined by 6,281 contracts. Stand aside.

Gasoline:

The Commitment of Traders Report showed in the managed money category, speculators liquidated 1,435 contracts of their long positions and also liquidated 1,038 contracts of their short positions. Similar to past weeks, commercial interests did the bulk of liquidation and this week was no different. Commercials liquidated 24,865 contracts of their long positions and 17,452 contracts of their short positions. Managed money speculators are long by a ratio of 5.85 to 1.

August gasoline gained 4.3/4 cents on light volume of 123,092 contracts. Open interest increased by a minuscule 276 contracts. Stand aside.

 Copper:

The Commitment of Traders Report showed in the managed money category, speculators added 3,819 contracts to their long positions and liquidated 8,201 contracts of their short positions. Commercial interests liquidated 7,771 contracts of their long positions and added 627 contracts to their short positions. As of the latest report, managed money speculators are short Copper by a ratio of 1.06 to 1. This is down significantly from the previous week’s report when the ratio of shorts to longs was 1.49 to 1.

September copper gained 2.20 cents on very light volume of 35,860 contracts. Open interest increased by a minuscule 158 contracts. Stand aside.

Gold: 

The Commitment of Traders Report showed in the managed money category, speculators added 16,113 contracts to their long positions and liquidated 8,005 contracts of their short positions. Commercial interests liquidated 70 contracts of their long positions and added 14,732 contracts to their short positions. Managed money speculators are long by a ratio of 4.87 to 1.

August gold gained $10.20 on light volume of 120,146 contracts. Open interest increased by 5,469 contracts. Investors should keep in mind that if gold penetrates $1523.90, the next area support will be the $1,470.

Silver:

The Commitment of Traders Report showed in the managed money category, speculators added 1,082 contracts to their long positions and liquidated 2,618 contracts of their short positions. Commercial interests liquidated 1,108 contracts of their long positions and added 3,135 contracts to their short positions. Managed money speculators are long by a ratio of 1.48 to 1.

September silver gained 52.4 cents on light volume of 26,267 contracts. Open interest declined by 630 contracts. Although gold may not penetrate $1523.90, it appears more likely that silver will penetrate the low of $26.10 made on June 28. Stand aside.

Euro:

The Commitment of Traders Report showed in the leveraged funds category, speculators added 1,964 contracts to their long positions and liquidated 22,100 contracts of their short positions. As of the latest report, managed money is short by a ratio of 2.63 to 1.

The September Euro gained 38 points on very light volume of 219,010 contracts. Open interest declined by 3,932 contracts. As I write this on July 10, the September Euro is down 55 points and has made a new low at 1.2246. Stand aside.

S&P 500 E mini:

The Commitment of Traders Report showed in the leveraged funds category, speculators added 6,514 contracts to their long positions and liquidated 34,425 contracts of their short positions. As of the latest report, leveraged funds are short by a ratio of 2.15 to 1.

The September S&P 500 E mini lost 2.00 points on light volume of 1,474,934 contracts. Open interest increased by 1,696 contracts. Investors should be talking with their investment advisor or broker regarding entering long positions in Apple computer, and avoiding the S&P 500, despite the fact it is on a short and intermediate term buy signal. Investors should also consult with their advisor or broker regarding the implementation or maintenance of long put protection.