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Soybeans: On July 28, August and September soybeans will generate short-term sell signals.

August soybeans lost 30.00 cents on heavier than normal volume of 253,520 contracts. Volume was the strongest since July 10 when the August contract gained 5.75 cents on volume of 268,598 contracts and total open interest increased by 2,420. On July 27, total open interest declined by 6,842 contracts, which relative to volume is average. The August contract lost 6,571 of open interest, new crop November -5462, May 2016-677.

As this report is being compiled on July 28, the September contract is trading at 12.00 cents above yesterday’s close. The open interest action and soybeans has been positive because total open interest has not increased on price declines.For example, during the past three sessions August soybeans declined by 10.75, 18.75, and 30.00 cents and total open interest has declined each day. Although, the underlying trend is lower, we expect a rally, now that soybeans have generated a short-term sell signal. Usually, after the generation of a sell signal, the market tends to have a counter trend rally lasting 1-3 days.

Soybean oil: We recommend that clients take profits on the bearish soybean oil position originally recommended on June 23.

This will be our last report on soybean oil until we announce a signal change or see a trading opportunity. August and September soybean oil remain on short and intermediate term sell signals

August soybean oil lost 37 points on volume of 137,745 contracts. Volume was the strongest since June 30 when August soybean oil is advanced 54 points on volume of 175,369 contracts and total open interest increased by 1,128. On July 27, total open interest declined by 2,103 contracts, which relative to volume is approximately 40% below average. The August contract lost 7,611 of open interest, March 2016 -302. As this report is being compiled on July 28, the September contract is trading 38 points above yesterday’s close.

Soybean meal:

August soybean meal lost $10.60 on volume of 145,197 contracts. Volume was the strongest since June 30 when the August contract gained $17.90 on volume of 192,303 contracts and total open interest increased by 594.On July 27, total open interest declined by 4,881 contracts, which relative to volume is approximately 15% above average meaning liquidation was heavier than normal.

The August contract lost 6,094 of open interest, October 2015 -1119, December 2015 -2,106, March 2016 -246. There was liquidation across the board, and like soybeans and soybean oil, for the past three days prices have declined along with open interest, which is healthy open interest action relative to the price decline. In summary, we are not seeing total open interest increases, which leads us to think a rally could occur at any time. August and September soybean meal remain on short and intermediate term buy signals. As this report is being compiled on July 28, the September contract is trading 90 cents lower.

Corn: On July 27, September and December 2015 corn generated short-term sell signals, but remain on intermediate term buy signals.

September corn lost 19.50 cents on heavy volume of 520,649 contracts. Volume was the strongest since July 7 when the September contract lost 3.25 cents on volume of 564,168 contracts and total open interest increased by 9,218. On July 27, total open interest declined only 3,841 contracts, which relative to volume is approximately 65% below average. The September contract lost 18,585 of open interest, December 2016 -328.

There were sufficient open interest increases in the forward months to offset a good portion of the decline in the September 2015 and December 2016 contracts.The price and open interest action on July 27 was very very bearish in our view because the liquidation was quite minimal considering the magnitude of the decline. This tells us there remain large numbers of speculative longs who have not liquidated and will be forced out of their positions as prices move lower.

As we pointed out yesterday’s report, and the weekend wrap, large numbers of speculative longs showing losses will use any rally to liquidate, which will serve to keep a lid on any advance. Usually, after the generation of a short-term sell signal, the market has a tendency to rally from 1-3 days and this is the opportunity to initiate bearish positions. However, corn may only be able to rally one and not more than two days before resuming the downtrend. As this report is being compiled on July 28, the September contract is trading 2.50 lower and has made a new low for the move of 3.70.

Chicago wheat: On July 27, September and December Chicago wheat generated an intermediate term sell signal after generating a short-term sell signal on July 21.

This will be our last report on Chicago wheat until we see a trading opportunity or announce a signal change. 

September Chicago wheat lost 9.25 cents on volume of 110,072 contracts. Total open interest declined by 671 contracts, which relative to volume is approximately 70% below average. The September contract lost 2,446 of open interest. As this report is being compiled on July 28, the September contract is trading 4.50 above yesterday’s close and has made a daily high of 5.10 1/2, which is below yesterday’s print of 5.11 3/4.

Cotton: On July 27, December cotton generated short and intermediate term sell signals,

This will be our last report on cotton until we see a trading opportunity or announce a signal change.

December cotton lost 84 points on volume of 22,699 contracts. Total open interest increased by 897 contracts, which relative to volume is approximately 30% above average, meaning that aggressive new short-sellers were entering the market and driving prices to a new low for the move of 63.69. The December contract lost 752 of open interest, which makes the more impressive (bearish). As this report is being compiled on July 28, December cotton is trading 20 points higher on the day, and cotton should experience a counter trend rally lasting 1-3 days and this is the opportunity to initiate bearish positions.

Cocoa: On July 27 September cocoa generated a short-term sell signal, but remains on intermediate term buy signal.

September cocoa advanced $12.00 on volume of 29,324 contracts. Total open interest declined by a massive 2,693 contracts, which relative to volume is approximately 260% above average meaning liquidation was extremely heavy on the fractional gain. The September contract lost 3,261 of open interest. As this report is being compiled on July 28, September cocoa is trading $4.00 lower on the day. Now that September cocoa is on a short-term sell signal, the market should have a counter trend rally lasting 1-3 days and this will be the opportunity to initiate bearish positions.

S&P 500 E mini: On July 27, the September S&P 500 E mini generated a short-term sell signal, but remains on an intermediate term buy signal.

The S&P 500 E mini lost 13.00 points on heavy volume of 1,784,714 contracts. Volume exceeded that of July 24 when the September contract lost 21.00 points on volume of 1,672,343 contracts and total open interest increased by 34,418. On July 27, total open interest increased by 23,944 contracts, which relative to volume is approximately 45% below average.

As this report is being compiled on July 28, the September contract is advancing 19.25 points and has made a daily high of 2085.25. Recently, the buy/sell signals for the E mini have had quick reversals and we do not discount the possibility this pattern may continue.

For the short term sell signal to reverse, the low of the day must be above OIA’s key pivot point for July 28 of 2097.70. Thus far in trading on July 28, the low has been 2061.50. We continue to advocate long option straddles and strangles in the December E mini contract. For subscribers to OIA direct, please call with any question.