August soybeans gained 1.25 cents while the November contract advanced 11.25 on total volume of 160,717 contracts. Volume was the lowest since July 10 when August soybeans lost 13.75 cents and November – 10.75 on total volume of 151,975 contracts and total open interest increased by 1,052 contracts. On July 14, total open interest increased by 3,884 contracts, which relative to volume is average. The July contract lost 162 of open interest, August -2533 and the November contract gained 2727 of open interest. Open interest increased in the September 2014 through the November 2015 contracts.
As this report is being compiled on July 15, August soybeans are trading 19.25 cents lower and November -12.25 and the daily low in the August contract broke below July 11 11.59 1/4 while the November contract has not broken below 10.65 made on July 11.The point we made in the July 7 report continues to have validity: The market must shed speculative longs in order to relieve selling pressure.Although soybeans are massively oversold and due for a rally, what applies in equities on the upside also applies to soybeans on the downside: The market can and will have moves for a longer duration than anyone thinks possible.We continue to advise a stand aside posture. August and November soybeans remain on a short and intermediate term sell signal.
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.
September corn gained 3.25 cents on volume of 206,346 contracts. Remarkably, total open interest declined by only 9 contracts. The July contract lost 381 of open interest and December -3513. On July 14, September corn made a new contract low at $3.74 and this has been taken out on July 15 as September corn is trading 9.00 cents lower and has made a new contract low of 3.71.Looking at the long-term continuation chart, we see no support for September corn until 3.62, the low made on July 26, 2010.
From the July 13 Weekend Wrap:
“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.”
September Chicago wheat advanced 11.75 cents on volume of 74,561 contracts. Volume was the lightest since July 9 when September wheat lost 5.00 cents on volume of 70,522 contracts and total open interest increased by 1,961 contracts. On July 14, total open interest increased by 2,001 contracts, which relative to volume is average. As this report is being compiled on July 15, September Chicago wheat is trading 5.25 cents lower, but has not taken out yesterday’s contract low of 5.24 1/4, which is the lowest print since July 2010. Chicago wheat is being hit from harvest pressure, aggressive new short selling and unimpressive exports.We are watching the wheat-corn spread, and it made its recent low at $1.44 on June 24, and this area has shown to be supportive going back to February 27 when the spread closed at 1.45 1/2. The most recent high was made on May 7 when the spread closed at $2.35 1/2.. September Chicago wheat remains on a short and intermediate term sell signal. Stand aside.
August live cattle lost 1.325 cents on total volume of 76,274 contracts. Total open interest declined by 597 contracts, which relative to volume is approximately 60% below average. The August contract accounted for loss of 9,469 of open interest. As this report is being compiled On July 15, August cattle is trading 75 points higher on low volume. The total open interest decline is very favorable, and we are looking for a reduction in this week’s ratio in the COT report. As it stands now, the number of managed money longs in cattle is the lowest since January 2014, and if cattle continues to shed speculative longs, one area of potential selling pressure is diminished, which sets the stage for a rally after demand kicks in. This combined with a low ratio may be a set up for a good buying opportunity.For August cattle to generate a short-term sell signal, the high of the day must be below 1.45180.Continue to stand aside.
WTI crude oil:
August WTI crude oil advanced 8 cents on heavy volume of 634,304 contracts. Volume was slightly below that of July 11 when August WTI crude oil lost $2.10 on volume of 637,532 contracts while total open interest declined by 6,897 contracts. On July 14, total open interest increased by 2,542 contracts, which relative to volume is approximately 80% below average. The August contract accounted for loss of 14,550 of open interest. August crude made a low of 100.22 then rallied to close essentially unchanged on the day.
However, on July 15, the story is vastly different with August crude trading $1.52 lower and making a new low for the move at 99.01, which is the lowest print since May 13 (98.86). After topping at 107.50 on June 25, August crude has declined every day with the exception of July 10 and July 14. On July 3, OIA announced that August crude had generated a short-term sell signal and generated an intermediate term sell signal on July 11.August crude is massively oversold, and should find support at the 200 day moving average of 97.47, which is close to early May support of 97.30 made on May 1 and May 5. This was the low going back to early April. As of the July 8 COT report, managed money was long crude oil by ratio of 8.61:1, and is the lowest reading since April 1 when managed money was long crude oil by ratio of 7.51:1.On April 1, August crude closed at 97.28, however, the lead month May contract closed at 99.74, which is about where August crude oil is trading on July 15. Stand aside.
August natural gas advanced 1.1 cents on volume of 238,050 contracts. Total open interest increased by 2,917 contracts, which relative to volume is approximately 45% less than average. The August contract lost 7,347 of open interest.On July 14, August natural gas made a low of 4.092, which is the lowest print since January 21, 2014 (4.061) and on the continuation chart the lowest print since 3.953 made on January 10 by the February 2014 contract.As this report is being compiled on July 15, natural gas is trading 3.1 cents lower and has made another new low of $4.088. Stand aside.
September euro advanced 10 pips on light volume of 107,023 contracts. Total open interest declined by 882 contracts, which relative to volume is approximately 55% below average. As this report is being compiled on July 15, the September euro is trading 51 pips lower and has made a new low for the move at 1.3564, which is the lowest print since 1.3563 made on June 19. A week or so ago, it looked like the euro was going to generate a short-term sell signal, and it now appears inevitable this will occur, possibly tomorrow. Stand aside.
Swiss franc: Liquidate bullish September Swiss franc positions on July 15 and liquidate bullish CHFEUR positions.
The September Swiss franc gained 20 pips on volume of 30,869 contracts. Total open interest increased by 66 contracts. As this report is being compiled on July 15, the September Swiss franc is trading 48 pips lower and is made a low of 1.1162, which is the lowest print since 1.1155 made on July 3. In the July 3 report, we recommended bullish positions in the September Swiss franc and the Swiss franc-euro cross.It appears likely that the Swiss franc is going to generate a short-term sell signal, and the trade has been a disappointment.The bullish September Swiss franc trade and the bullish CHFEUR position will be close to break even or a minor loss if liquidated on July 15.
August gold lost $30.70 on very heavy volume of 240,101 contracts.Volume was slightly below the 245,499 contracts traded on June 19 when August gold advanced $41.40 and total open interest increased by 6168 contracts.On July 14, total open interest declined by 3,845 contracts, which relative to volume is approximately 35% below average, which means large numbers of speculative longs remain in gold. For example, from June 20 (which was the day after the major move in gold) through July 14, total open interest increased 22,565 contracts, however, August gold lost $9.90 in this time frame. This is bearish open interest action relative to the price decline from June 20 through July 14. In short, the massive increase of open interest was only able to push August gold prices to a high of 1346.80 on July 10.
In the July 7 report, we recommended writing calls, buying puts or selling a partial position and placing a sell stop at the June 25 low of 1305.40. Clients who followed this advice are very happy on July 15.We have no idea whether this is a shakeout, or something worse, but we would liquidate the bearish hedge on today’s decline. As this report is being compiled on July 15, August gold is trading $10.50 lower and has made a new low for the move at 1292.60, which is the lowest print since June 19 (1276.20).We recommend a stand aside posture in gold, but we have not made a previous bullish recommendation
From the July 13 Weekend Wrap:
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: Clients should be out of bullish positions based upon the penetration of 20.76 in the September contract and bearish hedges should be lifted on July 15 as well
September silver lost 54.7 cents on volume of 58,385 contracts. Volume was the highest since July 10 when September silver advanced 44 cents on volume of 60,739 contracts and total open interest increased by 1,098 contracts. On July 14, open interest declined by 1,964 contracts, which relative to volume is approximately 25% above average meaning that liquidation was reasonably heavy on the decline. As this report is being compiled on July 15, September silver is trading 9.9 cents lower and has made a daily low of 20.67, which is the lowest print since 20.63 made on June 20.From June 20 through July 14, total open interest declined by 3,671 contracts while September silver closed 8 cents lower. This open interest action is consistent with a decline, and we don’t view it negatively.
In the July 7 report, we recommended shorting calls, buying puts or selling a partial position originally recommended in the June 16 report. Additionally, we recommended a sell stop at the June 25 low of 20.76. Clients should be out of their bullish positions and on the sidelines. The silver trade proved to be very lucrative, and we will be monitoring silver closely to determine whether there is another low risk opportunity. Like gold, we have no idea whether this is a shakeout or whether silver has made a top or temporary top.