August soybeans gained 5.50 cents on very light volume of 185,747 contracts. Volume was the lowest since July 11 when the August contract lost 6.25 cents on volume of 190,738 contracts and total open interest declined by 6,056 contracts. On July 21, total open interest declined by 7,248, which relative to volume is approximately 40% above average meaning liquidation was substantial on the modest advance.
In the earlier part of the session the August contract made a low of 10.23 3/4, which was a new low for the move and as this report is being compiled on July 22, the August contract is trading sharply lower, down 38.75 cents or -3.75%. Additionally, it has made a daily low of 9.85, which is the lowest print since 9.88 1/2 made on April 25, a three month low. Remarkably, the August contract is trading 17.47% from its 52-week high of 12.05 made on June 10 and is actually closer to its 52 week low of 8.61 1/4 (+ 15.47%) above this low.
The COT report will be released this afternoon and we will have a better idea of the extent to which managed money remains long in soybeans. According to the report issued last week, managed money was long soybeans by ratio of 7.52:1, which is an extraordinarily high number. As we have pointed out in previous recent reports, the lopsided long position of managed money will continue to exert selling pressure on soybeans until these speculators are blown out.
Soybeans are massively oversold and we discourage speculative clients from chasing bearish positions. On July 6, OIA announced that soybeans generated a short term sell signal and intermediate term sell signal on July 20 We are reprinting an extract from the report of June 10, the day that soybeans topped. In this and subsequent reports, we strongly discouraged clients from entering bullish positions due to the seasonal tendency of soybeans to top in the June-July time frame. Additionally, we cautioned clients to have their sell parameters in place on bullish positions initiated from lower levels.
From the June 10 research note on soybeans:
“Similar to corn, soybeans have a tendency to top out in the June-July time frame, and we strongly recommend against new bullish positions. Clients should have their sell parameters in place. Do not attempt to pick a top in soybeans.”
September corn lost 3.25 cents on volume of 293,595 contracts. Volume declined from July 20 when the September contract lost 4.25 cents on volume of 349,746 contracts and total open interest increased by 2,794, a bearish reading. On July 21, total open interest increased by 7,882 contracts, which relative to volume is average and is another bearish reading. The September contract gained 2,739 of open interest and the December 2016 contract lost 2,966.
Yesterday, corn made a new contract low of 3.32 3/4 and as this report is being compiled on July 22 has made another new contract low of 3.26 3/4, which is not far from the September-October 2014 lows of 3.18-3.19. The COT report released this afternoon will tell us the extent to which managed money has increased their net short position. According to the last report, managed money was short corn by ratio 1.04:1, which was a complete reversal from the previous week when they were long by a ratio of 1.72:1. Two weeks ago managed money was long corn by ratio of 2.88:1. Corn remains on short and intermediate term sell signals. We have no recommendation.
WTI crude oil:
September WTI crude oil lost $1.00 on surprisingly light volume of 673,874 contracts. Volume was weaker than July 18 when the September contract lost 71 cents on volume of 718,308 contracts and total open interest declined by 10,020 contracts. On July 21, total open interest increased by a sizable 13,620 contracts, which relative to volume is approximately 20% below average, but an open interest increase on yesterday strong decline indicates that short-sellers were piling in and driving prices lower (44.52).
As this report is being compiled on July 22, the September contract is trading lower again, down 80 cents or -1.79% and has made a new low for the move of $43.76, which is the lowest print since 43.03 made on May 10. Remarkably, gasoline continues to be the weaker of the products and currently is trading 1.66 cents below yesterday’s close and has made a new low for the move of 1.3413, which is the lowest print since 1.3345 made on April 7, a couple of months before the beginning of the summer driving season. Apparently, China is exporting massive amounts of gasoline and this is creating a glut worldwide. Continue to hold the short call positions in WTI recommended in the report of June 20.
Natural gas: On July 21, August and September natural gas generated short term sell signals, but remain on intermediate term buy signals.
August natural gas gained 3.4 cents on volume of 342,751 contracts. Total open interest declined by 12,470 contracts, which relative to volume is approximately 20% above average. The August contract accounted for a loss of 20,370 of open interest. As this report is being compiled on July 22, the August contract is having its usual counter trend rally after the generation of the sell signal and is trading 9.7 cents higher on the day. As we alluded to in yesterday’s report, we expect there will be a terrific trading opportunity on the bullish side a natural gas especially during the winter months. For now, stand aside.
August gold advanced $11.70 on heavy volume of 329,190 contracts. Volume was the strongest since July 5 when the August contract gained $19.70 on volume of 393,410 contracts and total open interest increased by 12,156. On July 21, total open interest declined by 6,536 contracts, which relative to volume is approximately 20% below average, but an open interest declined on yesterday’s advance is negative. The August contract accounted for a loss of 30,663 of open interest, which means there were NOT enough open interest increases in the forward must offset the decline in August.
As this report is being compiled on July 22, the August contract is trading $8.70 lower and has made a daily high 1334.00, which exactly matches yesterday’s high. Additionally, it has made a daily low of 1319.40, which is above yesterday’s print of 1310.70. We continue to recommend a stand aside posture for bullish positions and a short term sell signal will occur if the daily high is below OIA’s key pivot point for July 22 of 1320.00. The rally will resume if the daily low is above OIA’s pivot point for July 22 of 1344.80.
Currently, the September dollar index is trading 45.9 points above yesterday’s close and has made a new high for the move of 97.585, which is the highest print since 98.500 made on March 10. The strong advance of the dollar index has been depressing commodity prices, but as yet it has not affected equity prices. If the dollar index continues its rally we expect this to change. At this juncture, we have no recommendation.
S&P 500 E-mini:
The September S&P 500 E-mini had one of its rare pullbacks on July 21, down 9.50 points on light volume of 1,302,296 contracts. However, volume picked up from July 20 when the September contract gained 8.75 points on volume of 1,140,512 and total open interest declined by 5,480. On July 21, total open interest declined by 17,067 contracts, which relative to volume is approximately 40% below average. Yesterday the September contract made a low of 2153.50 and as this report is being compiled on July 22 the September contract is trading 8.75 points higher and has made a daily low of 2156.00 and a high of 2167.75 on very light volume, which is below yesterday’s all-time high of 2170.25. Stand aside.