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Soybeans: On July 28, August and September soybeans generated short term sell signals, but remain on intermediate term buy signals

September soybeans advanced 14.75 cents on total volume of 198,878 contracts. Volume was the lowest since July 24 when the August contract lost 18.75 cents on volume of 196,429 contracts and total open interest declined by 18,293. On July 28, total open interest declined by a sizable 8,603 contracts, which relative to volume is approximately 70% above average meaning liquidation was extremely heavy on yesterday’s advance. The open interest declines were across the board with the August contract losing 4,788, new crop November -6,572, January 2016 -209, March 2016 -299.

In summary, market participants were taking advantage of the rally and liquidating on the advance. This confirms the weak technical condition of the market and makes it vulnerable to continued declines unless there is a major weather event. As this report is being compiled on July 29, the September contract is trading 6.25 cents above yesterday’s close, and today is the first day of the counter trend rally after August and September soybeans generated a short-term sell signal.¬†Conceivably, another day or two of advances may occur, but we do not think the market has the momentum for a substantial move higher unless there is a weather scare.

Soybean meal:

September soybean meal advanced 90 cents on volume of 97,934 contracts. Total open interest declined by 2,950 contracts, which relative to volume is approximately 10% above average meaning liquidation was heavier than normal. The August contract lost 4,216 of open interest, September 2015 -387, December 2015 -489.

As this report is being compiled on July 29, September soybean meal is trading 4.50 higher. Thus far, soybean meal has been holding up rather well, but with soybeans and soybean oil on sell signals, we question how much longer it will be before meal succumbs to sell signals.¬†For September soybean meal to generate a short-term sell signal, the high of the day must be below OIA’s key pivot point for July 29 of 332.30. August and September soybean meal remain on short and intermediate term buy signals.

Corn:

September corn gained 2.00 cents on volume of 315,375 contracts. Volume was substantially below that of July 27 when September corn lost 19.50 cents on volume of 520,649 contracts and total open interest declined by 3,841. However, volume was above that of July 24 when September corn lost 10.75 cents on volume of 274,709 contracts and total open interest declined by 9,946.

On July 28, total open interest declined by a massive 16,006 contracts, which relative to volume is approximately 100% above average meaning liquidation was extremely heavy on a narrow range day of 6.00 cents when the September contract closed fractionally higher. Open interest declines were across the board with the September contract losing 6,308, December 2015 -3,732, March 2016 -4,860, July 2016 -369. Market participants were taking advantage of the narrow range day to bail out of positions at a wholesale pace.

On July 27, September and December corn generated a short-term sell signal, and as this report is being compiled on July 29, the September contract is trading 6.25 cents lower and has made a new low for the move of 3.68, which is the lowest print since 3.68 1/2 made on June 25. The Chicago wheat contract is trading sharply lower, down 11.25 cents and this is adding to the pressure on corn. An intermediate term sell signal will be generated if the high of the day is below OIA’s key pivot point for July 29 of 3.69 1/4. Until the selling pressure by managed money is relieved, we think rallies will continue to be 1-2 day events before corn resumes its downtrend.

From the July 26 Weekend Wrap:

“Another point to keep in mind: Because a fair number of professional money managers are holding positions that are underwater, when corn does rally, selling by these managers to trim losses will keep a lid on it advances. We have been expecting a rally, and now think it will be muted due to the overhang of speculative long positions showing losses.”