We will report the highlights of the  WASDE report in the upcoming July 11 report, which will be published on July 14.

When evaluating the possibility of a bottom, or temporary bottom in the grains, the focus should be less on price than the imbalance of supply and demand for futures contracts.

Beginning on July 8, we placed the above sentence in each report to remind clients that the focus should not be on price, but rather the imbalance of supply and demand for futures contracts. The reason; this is going to be the primary driver of prices until the distorted position of managed money aligns itself with market conditions. Once this occurs, prices should begin to stabilize.

We have been asked by clients and others when the current carnage in the grain markets will dissipate and the time frame for a bottoming process. We will be discussing individual commodities below, but the grain complex is trading in an environment that we have not seen in recent memory. Remarkably, despite being at new contract lows, soybeans, soybean meal, soybean oil, corn, Kansas City wheat, cotton have one data point in common: Managed money is net long all of these commodities and in certain cases heavily net long.

Anyone long the aforementioned markets has losses and in some cases horrendous losses. And there in lies the problem: The market knows longs are carrying losses and will be forced to liquidate at some point in the future. As a result, sophisticated market participants will take advantage by initiating new short positions on rallies and selling by distressed longs will add cap those advances. This will keep a lid on rallies until such time that a hefty percentage of speculative longs have been blown out. The timing for this is difficult to ascertain because it depends upon the strength of downside momentum and the duration of subsequent rallies. However, as markets continue to decline, the pressure on longs to liquidate will increase, possibly creating a capitulation type bottom.

In previous market reports, we have described scenarios that would be conducive for markets to put in bottoms, or temporary bottoms. The above-mentioned markets are massively oversold and well overdue for a rally. However, our view is any rally is suspect, and we recommend against bullish positions in any of the markets mentioned above.

From the July 7 report:

Due to the relatively heavy long position of managed money in soybeans, soybean meal, soybean oil, corn and Kansas City wheat, rallies will not get far because those with losses will be looking to sell positions as the market rallies. This will cap advances.

Soybeans:

For the week, July soybeans lost 92.00 cents, August – $1.04, November -58.50. The COT report revealed that managed money liquidated 7,533 contracts of their long positions and added 4,097 contracts to their short positions. Commercial interests added 9,764 contracts to their long positions and liquidated 12,766 contracts of their short positions. As of the latest report, managed money is long soybeans by ratio of 1.58:1, which is down from the previous week of 1.76:1 and the ratio of 2 weeks ago of 1.90:1.

Two weeks ago managed money was long by a ratio of 1.90:1 while commercial interests were short soybeans by a ratio of 1.36:1. By the July 8 COT report, managed money is long by a ratio of 1.58:1 while commercial interests reduced their short positions to the ratio of 1.08:1. From June 25 (which is the 1st day of the new COT report tabulated on July 1, through July 8 , August soybeans lost $1.09 1/4 or -8.05% while the November contract lost 1.08 1/4, or -8.84%.However, during this time manage money barely liquidated its long positions. For example, the net long position of managed money according to the June 24 report stood at 64,572 contracts and by the July 8 report had been pared to 47,824 contracts, or a net reduction of 16,748 contracts.The open interest stats support the small reduction in the net long position of manage money. For example, from June 25 through July 10 (final stats only) total open interest increased by 3,842 contracts, during the time that August and November beans fell by over $1.00 and liquidation was occurring in the July contract as it approached 1st notice day.

On Friday, after the release of the WASDE report, August soybeans had a major tumble falling from 12.30 1/4 to 11.59 1/4 on the 15 minute chart and volume totaled 30,480 contracts in the August contract out of a total of 255,216 contracts traded during the entire session on July 11. The action in the November contract was even more pronounced during the 15 minute time frame moving from a high of 10.96 to a low of 10.65 on volume of 88,210 contracts.On numerous previous occasions, we have pointed out the importance of volume spikes on new lows or new highs. The last time front month soybeans made a low near 11.59 1/4 on the continuation chart occurred during mid January 2012. Based upon the reduction of short positions by commercial interests during the past couple of weeks, we suspect that it was commercial buying at the lows that lifted prices.While we are not recommending bullish positions, anyone short beans should know a rally is well overdue and the volume spike on July 11 may represent temporary capitulation. Keep in mind that the supply-demand dynamic for soybeans and soybean meal is considerably more favorable than it is corn and wheat. Additionally, the critical time for soybean development is number of weeks away and anything can happen weather wise.

Soybean meal:

For the week, July soybean meal lost $25.20, August -29.90, December -15.20. The COT report revealed that managed money liquidated 5,726 contracts of their long positions and added 2,397 contracts to their short positions. Commercial interests liquidated 518 contracts of their long positions and also liquidated 4,192 contracts of their short positions. As of the latest report, managed money is long soybean meal by ratio of 2.19:1, which is down from the previous week of 2.57:1 and the ratio of 2 weeks ago of 3.26:1.

Soybean oil:

For the week, July soybean oil lost 1.85 cents, August -1.90, December – 1.81. The COT report revealed that managed money liquidated 1,842 contracts of their long positions and added 5,436 contracts to their short positions. Commercial interests added 4,754 contracts to their long positions and liquidated 8,558 contracts of their short positions. As of the latest report, managed money is long soybean oil by ratio of 1.15:1, which is down from the previous week of 1.29:1, but up from the ratio of 2 weeks ago when managed money was long by ratio of 1.08:1.

Corn:

For the week, July corn lost 17.25 cents, September -31.25, December -30.50. The COT report revealed that managed money added 15,505 contracts to their long positions and also added 1,612 contracts to their short positions. Commercial interests added 12,668 contracts to their long positions and also added 10,080 contracts to their short positions. As of the latest report, managed money remains long corn by ratio of 1.73: 1, which surprisingly is up from the previous week of 1.66:1 and the ratio of 1.68:1.

Remarkable as it is, from July 2 through July 8, which is the span of the COT report, September corn fell 17.75 cents, or -4.27% and yet managed money added 15,505 contracts to their long positions and only added 1,612 contracts to their short positions. It appears the corn market is a victim of bottom picking by an assortment of speculators, who think corn has to be close to a major low. From July 2 through July 8,total open interest increased every day and totaled 24,961 contracts further indicating that longs were not liquidating.

The current long to short ratio of managed money is 1.73:1, which is the highest since 1.93:1 per the COT report of June 17. From June 18 through July 8 ( 3 COT reporting periods), September corn lost 35.75 cents, or -8.24%. However, the net long position of manage money declined only 14,572 contracts. Amazingly as it is, managed money is holding a larger long position on July 8 than was held per the June 17 COT report. On June 17, managed money held 306,377 contracts long and by July 8 were holding 315,595 contracts long. The short position increased from  158,628 contracts on June 17 to 182,418 contracts on July 8.

In summary, there is a large body of evidence that shows manage money is redefining the phrase “digging in” by refusing to liquidate despite sharply lower prices. Making this even more remarkable is the fact that September corn closed on Friday at levels last seen in August 2010. The contract low is in fact a multi-year low which makes the position of manage money all the more remarkable and untenable. Our view is that corn is far from a bottom and that a considerable amount of financial pain is in store for anyone long this market.

Chicago wheat:

For the week, July Chicago wheat lost 53.25 cents, September -53.50, December -56.00. The COT report revealed that managed money added 1,284 contracts to their long positions and also added 3,250 contracts to their short positions. Commercial interests added 5,653 contracts to their long positions and also added 1,287 contracts to their short positions. As of the latest report, managed money is short wheat by ratio of 1.57:1, which is about the same as the previous week of 1.55:1 and the ratio from 2 weeks ago of 1.57:1.

Kansas City wheat:

For the week, July Kansas City wheat lost 62.75 cents, September -51.00, December -50.25. The COT report revealed that managed money liquidated 2,236 contracts of their long positions and added 2,636 contracts to their short positions. Commercial interests added 1,874 contracts to their long positions and liquidated 1,525 contracts of their short positions. As of the latest report, managed money remains long Kansas City wheat by ratio of 1.89:1, which is down from the previous week of 2.29:1 and the ratio of 2 weeks ago of 2.57:1.

Thus far in the 3rd quarter, August soybean oil is the out performer with a loss of 5.60%, November soybeans -7.11%, Chicago wheat -8.85%, Kansas City wheat -9.14%, September corn -9.67%, August soybean meal -9.96%, August soybeans -10.08%.

Year to date, August soybean meal is the out performer with a loss of 0.44%, Kansas City wheat -3.01%, August soybeans -3.14%, November soybeans -5.29%, August soybean oil -7.96%, September corn -14.71%, Chicago wheat -16.54%.

Cotton:

For the week, December cotton lost 3.94 cents, March 2015 -3.98, May 2015 -3.84. The COT report revealed that managed money liquidated 2,449 contracts of their long positions and added 2,411 contracts to their short positions.Commercial interests added 2,469 contracts to their long positions and liquidated 5,268 contracts of their short positions. As of the latest report, managed money is long cotton by ratio of 1.61:1, which is down from the previous week of 1.90:1 and down dramatically from the ratio of 2 weeks ago of 2.67:1.

Sugar #11:

For the week, October sugar lost 74 points, March 2015 -35, May -25. The COT report revealed that managed money liquidated 24,397 contracts of their long positions and added 14,855 contracts to their short positions. Commercial interests added 344 contracts to their long positions and liquidated 38,115 contracts of their short positions. As of the latest report, managed money remains long sugar by ratio of 2.23:1, which is down substantially from the previous week of 3.03:1 and the ratio of 2 weeks ago of 3.19:1.

Coffee:

For the week, September coffee lost 10.40 cents, December -10.30, March 2015 -10.15. The COT report revealed that managed money liquidated 1,001 contracts of their long positions and also liquidated 337 contracts of their short positions. Commercial interests liquidated 290 contracts of their long positions and also liquidated 1,466 contracts of their short positions. As of the latest report, managed money is long coffee by ratio of 6.08:1, which is up slightly from the previous week of 5.95:1 but down from the ratio of 2 weeks ago of 6.54:1.

We think coffee may be one of our best trades in calendar year 2014, but the market has to shake out the hefty number of longs and build a base before coffee is ready to resume its uptrend. On April 23, September coffee topped out at $2.2060, and closed on Friday at 1.6140, after making a new low for the move at 1.5955, which is the lowest print since February 19 (1.5665). In short, the market has collapsed 61.05 cents from high to low and coffee is undergoing a liquidation cycle that is seen commonly in commodities. July coffee generated a short-term sell signal on May 12 and an intermediate term sell signal on June 3. During this time, we have been advising a stand aside posture and continue to do so until coffee generates a short-term buy signal.

Cocoa:

For the week, September cocoa lost $16.00, December -15.00, March 2015 -12.00. The COT report revealed that managed money liquidated 242 contracts of their long positions and added 254 contracts to their short positions. Commercial interests liquidated 3,680 contracts of their long positions and also liquidated 3,899 contracts of their short positions. As of the latest report, managed money is long cocoa by ratio of 4.09:1, which is down slightly from the previous week of 4.15:1 and the ratio of 2 weeks ago of 4.29:1.

Thus far in the 3rd quarter, September cocoa is the out performer with a loss of 1.18%, October sugar -5.22%, December cotton -7.33%, September coffee -7.82%.

Year to date, September coffee is the out performer with a gain of 37.77%, September cocoa +13.23%, October sugar +0.12%, December cotton -13.15%.

Live cattle:

For the week, August live cattle lost 5.88 cents, October -5.25, December -3.05. The COT report revealed that managed money liquidated 3,091 contracts of their long positions and also liquidated 273 contracts of their short positions. Commercial interests liquidated 8,415 contracts of their long positions and also liquidated 3,452 contracts of their short positions. As of the latest report, managed money is long live cattle by ratio of 8.7:1, which is up slightly from the previous week of 8.63:1, but down from the ratio of 2 weeks ago of 9.35:1.

The current ratio is the lowest since January 21, 2014 when managed money was long live cattle by ratio of 8.88:1. The low ratio may be a set up for a terrific buying opportunity, but we want to see more downside action.

Lean hogs:

For the week, August lean hogs advanced 2.93 cents, August + 2.95, December +1.50. The COT report revealed that managed money liquidated 1,246 contracts of their long positions and added 403 contracts to their short positions. Commercial interests added 2,355 contracts to their long positions and liquidated 103 contracts of their short positions. As of the latest report, managed money is long lean hogs by ratio of 8.46:1, which is down from the previous week of 9.10:1, but up from the ratio of 2 weeks ago of 8.08:1.

Thus far in the 3rd quarter, December lean hogs is the out performer with a gain of 5.83%, December cattle -0.68%, August cattle -0.91%, August hogs -3.12%.

Year to date, August lean hogs is the out performer with a gain of 32.55%, December hogs + 31.26%,August cattle +16.57%, December cattle +16.06%.

As of July 11, WTI crude oil, Brent crude oil, gasoline, heating oil and natural gas are on short and intermediate term sell signals.

WTI crude oil:  On July 11, August WTI crude oil generated an intermediate term sell signal after generating a short-term sell signal on July 3.

For the week, August WTI crude oil lost $3.23, September -3.21, October -3.10. The COT report revealed that managed money liquidated 14,677 contracts of their long positions and added 1,410 contracts to their short positions. Commercial interests liquidated 3,018 contracts of their long positions and also liquidated 12,739 contracts of their short positions. As of the latest report, managed money is long WTI crude oil by ratio of 8.61:1, which is down from the previous week of 9.33:1, and the ratio of 2 weeks ago of 9.53:1.

The current ratio is the lowest since April 1, 2014 when managed money was long WTI crude oil by ratio of 7.51:1.

Brent crude oil: On July 11, September Brent crude oil generated an intermediate term sell signal after generating a short-term sell signal on July 3.

Heating oil:

For the week, August heating oil lost 6.75 cents, September -7.02, October -6.99. The COT report revealed that managed money liquidated 12,153 contracts of their long positions and added 3,023 contracts to their short positions. Commercial interests added 7,580 contracts to their long positions and liquidated 9,298 of their short positions. As of the latest report, managed money is long heating oil by ratio of 2.54:1, which is down dramatically from the previous week of 4.14:1 and the ratio of 2 weeks ago of 4.29:1.

Gasoline: On July 11, August gasoline generated an intermediate term sell signal after generating a short-term sell signal on July 7.

For the week, August gasoline lost 11.13 cents, September -10.18, October – 9.20. The COT report revealed that managed money liquidated 545 contracts of their long positions and added 1,221 contracts to their short positions. Commercial interests added 3,100 contracts to their long positions and also added 6,931 contracts to their short positions. As of the latest report, managed money is long gasoline by ratio of 3.51:1, which is down slightly from the previous week of 3.70:1 and the ratio of 2 weeks ago of 3.95:1.

Natural gas:

For the week, August natural gas lost 26.00 cents, September -25.90, October -24.80. The COT report revealed that managed money liquidated 7,706 contracts of their long positions and added 10,320 contracts to their short positions. Commercial interests liquidated 1,644 contracts of their long positions and also liquidated 3,733 contracts of their short positions. As of the latest report, managed money is long natural gas by ratio of 1.14:1, which is down from the previous week of 1.23:1 and the ratio of 2 weeks ago of 1.27:1.

The current ratio is the lowest since December 3, 2013 when managed money was long natural gas by ratio of 1.10:1.

Thus far in the 3rd quarter, August ethanol is the out performer with a gain of 3.79%, August heating oil -3.71%, August gasoline -4.35%, August WTI crude oil -4.45%, September Brent crude oil -4.48%, August natural gas -7.23%.

Year to date, August ethanol is the out performer with a gain of 24.38%, August WTI crude oil +5.37%, August gasoline +2.01%, August natural gas -0.29%, September Brent crude oil -0.68%, August heating oil -4.90%.

Copper:

For the week, September copper lost 1.05 cents. The COT report revealed that managed money added 11,673 contracts to their long positions and liquidated 1,914 contracts of their short positions. Commercial interests added 122 contracts to their long positions and also added 6,832 contracts to their short positions. As of the latest report, managed money is long copper by ratio of 3.15:1, which is up dramatically from the previous week of 2.25:1 and nearly double the ratio of 2 weeks ago of 1.70:1.

When copper was trading at approximately the same level back in early March 2014, managed money was short by a ratio of 1.32:1. On March 4, March copper closed at 3.2615 and on July 8, 2014 the September contract closed at 3.2430. However, in the COT report of December 31, 2013, managed money was long copper by a ratio of 2.76:1, and the nearby copper contract closed at $3.4415. In short, managed money is far more bullish today than when copper prices were at the approximate same level in early March. Additionally, they are more bullish than in late December when copper prices were trading approximately 15 cents higher. In our view, this is a sign to be cautious if trading copper on the long side. Additionally, copper remains in a bearish moving average set up with the 50 day moving average at 3.1269 and the 200 day average at 3.1870

Palladium:

For the week, September palladium advanced $13.40. The COT report revealed that managed money added 21 contracts to their long positions and liquidated 164 contracts of their short positions. Commercial interests added 62 contracts to their long positions and also added 580 contracts to their short positions. As of the latest report, managed money is long palladium by ratio of 5.75:1, which is up from the previous week of 5.54:1 and the ratio of 2 weeks ago of 5.36:1.

Platinum:

For the week, October platinum advanced $6.10. The COT report revealed that managed money added 2,140 contracts to their long positions and also added 44 contracts to their short positions.Commercial interests added 609 contracts to their long positions and also added 1,465 contracts to their short positions.As of the latest report, managed money is long platinum by a massive 19.69:1, which is up from the previous week of 19.11:1 and up substantially from the ratio of 2 weeks ago of 15.00:1.

Gold:

For the week, August gold advanced $16.80. The COT report revealed that managed money added 5,492 contracts to their long positions and liquidated 2,330 contracts of their short positions. Commercial interests liquidated 3,821 contracts of their long positions and added 5,093 contracts to their short positions. As of the latest report, managed money is long gold by a ratio of 7.39:1, which is up from the previous week of 6.41:1 and nearly double the ratio of 2 weeks ago of 3.88:1.

The current ratio of 7.39:1 is the highest since the COT tabulation date of March 18, 2014 when managed money was long gold by ratio of 8.49:1. The trading range encompassed by that report was a low of 1346.20 on March 12 to a high of 1392.00 on March 17.

Silver:

For the week, September silver gained 32.4 cents. The COT report revealed that managed money added 6,294 contracts to their long positions and liquidated 1,455 contracts of their short positions. Commercial interests liquidated 1,814 contracts of their long positions and added 1,159 contracts to their short positions. As of the latest report, managed money is long silver by ratio of 4.79:1, which is up substantially from the previous week of 3.78:1 and slightly more than double the ratio of 2 weeks ago of 2.38:1.

Note that the ratio in gold is significantly higher than silver, even though silver is outperforming gold in the 3rd quarter and only slightly trailing gold year to date.

The current move in precious metals may have considerable staying power because the gold miners have been significantly outperforming the metals, which is something that we have not observed for couple of years. For example,the large gold mining companies contained in the ETF, GDX has advanced 3.29% in the 3rd quarter and the junior gold mining ETF, GDXJ is trading 7.74% higher in the current quarter. Year to date, GDX has advanced 29.29% while GDXJ is trading 46.63% higher.This performance is blowing away August gold, September silver as well as October platinum and September palladium.

Thus far in the 3rd quarter, September palladium is the out performer with a gain of 3.71%, September copper +2.08%, September silver +1.90%, October platinum +1.75%, August gold +0.84%.

Year to date, September palladium is the out performer with a gain of 21.35%, August gold + 11.20%, September silver +10.37%, October platinum 9.91%, September copper -2.82%.

Canadian dollar:

For the week, the September Canadian dollar lost 96 pips. The COT report revealed that leveraged funds added 13,849 contracts to their long positions and also added 5,575 contracts to their short positions. As of the latest report, leveraged funds are short the Canadian dollar by ratio of 1.07:1, which is down from the previous week of 1.38:1 and down dramatically from the ratio of 2 weeks ago of 1.83:1.

The current ratio in the Canadian dollar is the lowest in several months just as the Canadian dollar climbed to its highest level since early January 2014.

Australian dollar:

For the week, the September Australian dollar gained 37 pips. The COT report revealed that leveraged funds liquidated 10,176 contracts of their long positions and also liquidated 6,881 contracts of their short positions. As of the latest report, leveraged funds are long the Australian dollar by ratio of 2.62:1, which is up from the previous week of 2.37:1 and the ratio of 2 weeks ago of 2.41:1.

Swiss franc:

For the week, the September Swiss franc gained 22 pips. The COT report revealed that leveraged funds liquidated 564 contracts of their long positions and liquidated 1,255 contracts of their short positions. As of the latest report, leveraged funds are short the Swiss franc by ratio of 1.59:1, which is down from the previous week of 1.72:1, but up from the ratio of 2 weeks ago of 1.53:1.

British pound:

For the week, the September British pound lost 31 pips. The COT report revealed that leveraged funds liquidated 9,356 contracts of their long positions and added 309 contracts to their short positions. As of the latest report, leveraged funds are long the British pound by ratio of 3.31:1, which is down from the previous week of 3.51:1 and the same as the ratio of 2 weeks ago of 3.32:1.

Euro:

For the week, the September euro gained 6 pips. The COT revealed that leveraged funds liquidated 737 contracts of their long positions and also liquidated 1,686 contracts of their short positions. As of the latest report, leveraged funds are short the euro by a ratio of 2.28:1, which is the same as the previous week (2.28:1), but above the ratio of 2 weeks ago of 2.12:1.

Yen:

For the week, the September yen gained 85 pips. The COT report revealed that leveraged funds liquidated 3,499 contracts of their long positions and added 1,987 contracts to their short positions. As of the latest report, managed money remains short the yen by ratio of 4.63:1, which is up significantly from the previous week of 3.71:1, and above the ratio of 2 weeks ago of 4.40:1.

Dollar index:

For the week, the September dollar index lost 6 points. The COT report revealed that leveraged funds liquidated 3,804 contracts of their long positions and also liquidated 3,684 contracts of their short positions. As of the latest report, leveraged funds are short the dollar index by ratio of 1.30:1, which is up from the previous week of 1.23:1, but down from the ratio of 2 weeks ago of 1.52:1.

Thus far in the 3rd quarter, the September dollar index is the out performer with a gain of 0.51%, September British pound +0.07%, September yen -0.02%, September Australian dollar -0.32%, September Canadian dollar -0.62%, September euro -0.63%, September Swiss franc -0.64%.

Year to date, the September Australian dollar is the out performer with a gain of 6.48%, September yen +3.77%, September British pound +3.49%, September dollar index – 0.37%, September Canadian dollar -0.53%, September Swiss franc -0.55%, September euro -1.31%.

S&P 500 (250 x):

The September S&P 500 futures contract lost 15.20 points. The COT report revealed that leveraged funds added 576 contracts to their long positions and liquidated 243 contracts of their short positions. As of the latest report, leveraged funds are short the S&P 500 futures contract by ratio of 1.09:1, which is down from the previous week of 1.18:1 and the ratio of 2 weeks ago of 1.19:1.

Thus far in the 3rd quarter, the NASDAQ 100 cash index is the out performer with a gain of 1.43%, Dow Jones Industrial Average cash index + 0.70%, S&P 500 cash index +0.37%, New York composite cash index -0.39%, S&P 400 cash index -1.50%, Russell 2000 cash index -2.77%.

Year to date, the NASDAQ 100 cash index is the out performer with a gain of 8.70%, S&P 500 cash index + 6.45%, New York composite cash index +5.15%, S&P 400 cash index +5.14%, Dow Jones Industrial Average cash index +2.21%, Russell 2000 cash index -0.32%. +