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August soybeans gained 5.25 cents on volume of 215,223 contracts. Open interest increased by 4,970 contracts, and relative to volume, the open interest increase was about average. The market made a new contract high at $16.47 3/4. As I write this on July 18, August soybeans are trading 14.25 cents higher and has made a new contract high. There is no telling how far the market can move, but as I have said before, a correction when it comes could be very sharp, but will likely be short-term with an attempt to re-test the high. At this juncture, it is not wise to enter the market on the long side or the short side. Stand aside.
August soybean meal gained $6.70 on volume of 86,800 contracts. Open interest increased by 3,835 contracts and relative to volume, the open interest increase was at the very high end of the range. This means that both new longs and shorts were willing to make strong commitments at stratospheric levels. With respect to current market positioning, my comments regarding soybeans are applicable to soybean meal, but because soybean meal has been the leader of the complex, the correction may be shallower. As I write this on July 18, August soybean meal is $12.50 higher and has made a new contract high.
September corn closed 2.75 cents higher on volume of 331,810 contracts. Open interest increased by 11,767 contracts, which in relation to volume was significantly above average. Open interest in corn has increased for 11 consecutive days bringing the grand total for this period to 127,687 contracts. As I write this on July 18, September corn is trading 9.75 cents higher. The key number to watch is the all-time high of $7.99 3/4. At this point, it is unwise to enter long or short positions, and it’s best to stand aside.
September wheat closed 1/2 cent higher on volume of 107,806 contracts. Open interest declined by 273 contracts. Wheat made a new contract high at $8.98 1/2, but pulled back and closed nearly unchanged. Wheat will continue to follow corn, and although there are some favorable supply issues that are potentially bullish for wheat, I believe this is being discounted by the market. Like the other grains, do not enter new long or short positions. Stand aside. Without
August crude oil advanced 41 cents on relatively heavy volume of 615,802 contracts. Volume was the highest since July 5 when 675,430 contracts were traded. Open interest declined by a massive 36,389 contracts, which in relation to volume is a huge number. Since July 11, when the rally began to accelerate through July 17, open interest has declined by 9,942 contracts. During this time, August crude oil has advanced $5.08, or 6.04%. The market is close to generating a short-term buy signal, but I remain less than enthusiastic about a sustained move higher in crude oil. The 50 day moving average is $87.29 and the 150 day moving averages $98.15. Stand aside.
August gasoline lost 0.97 cents on heavier than normal volume of 159,128 contracts. Volume was the highest since July 5 when 174,776 contracts were traded. Open interest increased by 1,990 contracts, which in relation to volume was below average. Since July 11 when the rally in gasoline began to accelerate, open interest has increased by 5,595 contracts. During this time, August gasoline advanced by 11 cents or 3.87%. The open interest increase of 5,595 contracts in relation to volume is abysmal, which indicates a lack of conviction on the part of new longs and shorts. On July 16, gasoline generated a short-term buy signal, but has yet to generate an intermediate term signal, which would be confirmation to implement bullish positions.
September copper lost 2.95 cents on volume of 52,386 contracts. Open interest increased on the decline, which is bearish, and the open interest increase relative to volume was significantly above average. This market has the pattern of open interest increases when the market declines, and open interest declines when the market rallies, all of which confirm the bear market in copper. The equities market has been rallying and hopefully this will give a boost the copper prices, which would allow for the implementation of bearish positions, provided copper can rally to the $3.55-$3.60 level. Stand aside.
August gold lost $2.10 on volume of 155,443 contracts. Open interest declined by 3,049 contracts, which in relation to volume was slightly below average. The market continues to act poorly and is beginning to take on the sloppy characteristics of silver. Any time the market rallies, there is no follow through and rallies are accompanied by declines of open interest, which indicates that both longs and shorts are liquidating as the market moves higher. Although, I believe gold has solid long-term value, investors have to be practical and be mindful of a potential slide in gold prices that would break the December 29 low of $1523.90. On July 18, equities indices are rallying, the grains are up sharply and the dollar is nearly unchanged, yet gold is trading $16.00 lower. In other words, even with the threat of potential food inflation, and with indices trading higher, gold is not responding positively.
September silver closed unchanged on volume of 40,752 contracts. Open interest declined by 747 contracts. Stand aside.
The September Euro gained 11 points on 265,221 contracts. Open interest declined by 1,244 contracts. Stand aside.
S&P 500 E mini:
The S&P 500 E mini gained 11.00 points on relatively heavy volume of 1,972,477 contracts. The market reached its highest point since July 6 when the S&P 500 E mini reached 1364.00. Volume was the highest since July 10 when 2,023,364 contracts were traded. Open interest declined by 5,306 contracts, which in relation to volume was a minuscule decline, but more significantly, the fact that open interest declined at all is bearish in relation to the price advance. On July 13, the S&P 500 E mini gained 22.50 points and open interest increased by only 8,751 contracts, which is an abysmal increase relative to volume. Adding the open interest from July 13 to the increase on July 17, the net total open interest increase for these two sessions is 3,445 contracts, which is terrible considering the two day advance was 33.50 points.
It appears we are on a path to retest the high of 1375.00 made on July 5, but there are crosscurrents that indicate a smooth unfettered rally is not in the offing. The world economies are slowing down, and there is talk about the US entering a recession or being in one now. On top of this, there is high short interest on the New York Stock Exchange, which is typically a short-term bullish indicator. Although participation is rather high as evidenced by relatively healthy volume, the willingness by investors to commit to new long or short positions is low. The VIX, which is referred to as a fear indicator, is at lows last seen in late April. This indicates there is a great deal of complacency in the market. As I write this on July 18, the S&P 500 E mini is trading 7.50 points higher. As I have mentioned before, I believe that Apple computer is the best way to play the equity rally and the earnings report for Apple will be released on July 24 after the close. Please consult your investment advisor or broker about positioning in the stock, and be mindful of entering positions prior to the earnings report.
Wishing all of you the best of trading and investing.