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August soybeans closed 35.50 cents higher on light volume of 239,053 contracts. Open interest increased by 5,373 contracts. Relative to volume, the open interest increase was average, which indicates a tepid level of commitment by investors. The low volume shows a lack of participation on the part of market players. To provide perspective, I examined two other trading sessions where soybeans closed significantly higher. On June 25, soybeans closed 40 cents higher on volume of 297,235 contracts. Open interest during this session declined by 4,528 contracts. On June 19 soybeans closed 49.50 cents higher on volume of 376,932 contracts. Open interest during this session increased by 11,857 contracts. It is readily apparent that as the market moves higher, volume is declining. If open interest for the three sessions is added together, the total amounts to 12,702 contracts on a three-day advance of $1.25. The combination of the price advance and open interest increase is unimpressive. As I write this on July 2, August soybeans are 13.25 cents higher. Investors should be consulting with their investment advisor or or broker regarding taking full or partial profits on any long positions. Do not enter new positions at current levels.
August soybean meal closed $8.20 higher on volume of 83,598 contracts. Open interest declined by 3,191 contracts. Although soybean meal has managed to advance over the past couple of days, the open interest action is negative. For example, open interest has declined for the past four sessions bringing the total four day decline to 11,679 contracts. During this time, soybean meal prices have declined 60 cents. This is negative open interest action in relation to price. Even though price was essentially unchanged during four sessions, longs and shorts were liquidating their positions. Certainly, during a sideways movement one would expect to see a decline or advance of open interest. The problem is the liquidation is relatively large. Investors should be consulting with their investment advisor or broker regarding taking full or partial profits on long positions. As I write this on July 2, August soybean meal is $4.80 higher.
September corn closed 2.25 cents higher on relatively heavy volume of 420,195 contracts. Total open interest declined by 3,967 contracts. Open interest has declined for the seventh day in a row, which indicates that the bullish weather situation in corn is not bringing in new participants that are willing to make commitments to the long or short side. The market remains on a short and intermediate term buy signal, but caution is the order of the day. In my view, investors should stand aside in corn. As I write this on July 2, corn is 22.75 cents higher.
September wheat closed 11.25 cents higher. Total open interest increased by 2,464 contracts. Compared to corn, open interest in wheat has been positive during the past four sessions. For example, open interest has increased by 5,689 contracts during the past four days while wheat has advanced by 16.25 cents. Corn during the same four day period advanced 37.25 cents, but open interest declined by 45,934 contracts. In other words, investors have stronger ideas about the direction of wheat then they do about corn. Remember, open interest declines when both longs and shorts agree it is time to liquidate. As I write this on July 2, September wheat is 6.75 cents higher and is currently trading at $7.64, however its 50 day moving average on the continuation chart is $6.43 1/4. This alone should give investors pause about entering the wheat market. Wheat remains on a short and intermediate term buy signal, and investors should be standing aside.
August crude oil closed $7.27 higher on very heavy volume of 787,945 contracts. Total open interest increased by an anemic 10,046 contracts. Despite the magnitude of the advance and the heavy volume accompanying it, the open interest increase was unimpressive to say the least. As I write this on July 2, August crude oil is down $1.53. Please see the commentary about the crude oil embargo by EU countries in the Weekend Wrap of July 1. The market remains on a short and intermediate term sell signal. Stand aside.
August gasoline closed 15.45 cents higher on very light volume of 117,685 contracts. Total open interest declined on the advance by 3,501 contracts. The action in gasoline is remarkable in two ways. First, volume was absolutely abysmal on an advance of this magnitude, and second, open interest did not increase, which I found somewhat surprising. The reason for this is the advance came from a low point, and therefore it would have been expected that new participants would be making new commitments, long or short. Additionally, there has been heavy liquidation in gasoline over the past couple of weeks. It is axiomatic that volume expands in the direction of the trend. And the action on June 29 is a prime example of this. For example, the volume on June 28 was 152,364 and gasoline declined by 2.16 cents. The previous day was the same story with the market with the market declining 2.40 cents on volume of 162,020 contracts. In other words, if it were a bull market, volume should be expanding with an upside move, and this is not the case. Volume only increases when gasoline is moving lower. Stand aside.
September copper closed 16.50 cents higher than normal volume of 84,131 contracts. Open interest declined by 1,358 contracts. Like gasoline, the volume was abysmal considering the magnitude of the increase and the open interest action was bearish in relation to the price advance. I want to see the market move up to the $3.60 area before implementing bearish positions. Stand aside.
August gold closed $53.80 higher on relatively heavy volume of 210,340 contracts. Open interest increased by a minuscule 1,620 contracts. The open interest action relative to the price advance was abysmal and only underscores the technical weakness of the market. As I have said before, if gold closes under the $1523.90 level, a move to $1470 is more than likely. Investors should consult with their investment advisor or broker regarding the acquisition of gold at lower prices for the long-term.
September silver closed $1.32 higher on very light volume of 62,256 contracts. Open interest declined by 1,401 contracts. When the action of June 28 is compared to June 29, it is easy to see the technical weakness of the silver market. On June 28 silver declined by 76.4 cents on volume of 91,528 contracts, and open interest increased on the decline by 1,364 contracts. In other words, when silver advanced, volume shrank and open interest decreased, and when it declined, the volume and open interest increased. This is clearly bearish open interest and volume action in relation to price. Stand aside.
The September Euro advanced 2.32 cents on volume of 388,431 contracts. Open interest declined by 11,772 contracts. Please see the commentary on the Euro in the Weekend Wrap of July 1. Stand aside.
S&P 500 E mini:
The S&P 500 E mini closed 34.00 points higher on heavy volume of 2,491,509 contracts. Total open interest declined by 21,826 contracts. This is clearly bearish open interest action in relation to price. Please see the commentary on the S&P 500 E mini and Apple Computer in the July 1 Weekend Wrap. In this post, I expressed my preference for being long Apple, provided it generates a short-term buy signal over being long the S&P 500 in the event that a short and/or immediate term buy signal is generated. Although Apple will not generate a short-term buy signal on July 2, it is highly likely this will occur on July 3. It is highly likely that a short and intermediate term buy signal will be generated for the S&P 500 on July 2. Investors should consult their investment advisor or broker regarding the maintenance of put protection.