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The exchanges released their open interest and volume data late today. The report will be somewhat truncated as a result.
September soybeans gained 18.50 cents on light volume of 224,460 contracts. Volume increased approximately 27,000 from the day before when soybeans advanced 54.75. Open interest increased by 3,790 contracts which in relation to volume is below average. The market rallied up to $16.99 3/4 and then pulled back. All in all, it was an unimpressive performance, and underscores the danger of buying into bullish narratives without regard to price levels. The USDA released its report and for the most part there were very few surprises, and based upon market action, the report had been discounted.
December soybean meal closed 30 cents lower on volume of 75,128 contracts volume declined by approximately 9,000 contracts from August 9. Open interest increased by 2,178 contracts, which in relation to volume is average.
December corn declined by 14.50 cents on very heavy volume of 457,645 contracts. Volume was the heaviest since July 11 when 550,005 contracts were traded and corn declined by 14.50 cents while open interest increased by 17,331 contracts. On August 10, open interest increased by a massive 27,711 contracts, which in relation to volume is is approximately 100% greater than average. Corn had an initial jump to a new all-time high at $8.49.and then pulled back dramatically to close sharply lower. Our view is that August 10 was a key reversal day and traders should wait for a rally up to the $8.31 level and then write calls (short calls) in distant strikes in the December contract.
December wheat lost 27.75 cents on heavy volume of 193,530 contracts. Volume was the heaviest since June 1 when 227,764 contracts were traded and wheat declined 31.50 cents while open interest increased by 1,991 contracts. The market may experience quite a bit of pressure since there are a relatively large number of longs and US wheat is priced at a premium. During the next couple weeks, we believe that wheat will bottom and that a terrific buying opportunity will present itself.
September crude oil lost 49.00 cents on volume of 502,143 contracts. Open interest declined approximately 56,000 contracts from the day before when the market closed up 1 cent and open interest increased by 7,801 contracts. On August 10, open interest increased by 9,151 contracts and relative to volume was below average. Open interest has increased for eight days in a row. It appears that the market is struggling to break above the $94.50 area.
September gasoline closed unchanged on very light volume of 124,403 contracts. Volume dropped approximately 43,000 from August 9 when gasoline advanced 2.04 cents and open interest increased by 4,500 contracts. On August 10, open interest increased by 2,347 contracts, which in relation to volume is less than average. Like crude, open interest has been increasing for six consecutive days, but as indicated in previous reports, the market appears to be at the upper end of its trading range.
September heating oil lost 2.45 cents on light volume of 124,955 contracts. Volume declined approximately 36,000 contracts from August 9 when heating oil gained 2.91 cents and open interest increased by 2,390 contracts. On August 10, open interest increased by 4,742 contracts, which in relation to volume is approximately 30% above average.
September copper lost 3.25 cents on volume of 62,758 contracts. Volume declined approximately 10,000 contracts from the day before when the market closed up 0.35 cents and open interest increased by 5,093 contracts. On August 10, open interest increased on the decline by 3,733 contracts, which in relation to volume is approximately 100% increase over the average. This is the second day in a row that open interest has increased by approximately twice the average amount. This means that buyers and sellers have strongly different views about the direction of copper prices. Unfortunately for the longs, the shorts are clearly in control.
December gold gained $2.60 on light volume of 122,253 contracts. Volume increased by approximately 40,000 contracts from August 9 when gold gained $4.20 and open interest increased by 1,196 contracts. On August 10, open interest increased by 6,097 contracts, which in relation to volume is approximately 75% above average. For the first time since gold is gone on a short-term sell signal, the open interest increase has been dramatically above average. This is a positive development, but the lackluster volume indicates that the speculative community is not enthusiastic about gold.
September silver lost 3.5 cents on volume of 53,981 contracts. Volume was the highest since June 29 when 62,256 contracts were traded and silver gained $1.32 while open interest declined by 1,401 contracts. On August 10, open interest increased by 828 contracts, which in relation to volume is significantly below average. It is interesting to note that for the period of August 3-August 9 silver advanced 3.56% versus gold, which advanced 1.66% in the same time frame. Although a several session performance advantage does not mean silver is going to overtake gold’s performance anytime soon, it may indicate that silver is in the process of strengthening. Please review the August 12 Weekend Wrap about silver option strategies.
The September Euro was unchanged on volume of 168,401 contracts. Open interest declined by 1391 contracts. At this juncture, there is no reason to be involved in the Euro.
S&P 500 E mini:
The S&P 500 E mini advanced 2.00 points on light volume of 1,248,118 contracts. Volume rose approximately 60,000 contracts from the day before when the E mini closed up 2.25 points and open interest increased by 12,069 contracts. On August 10, open interest increased by 19,618 contracts, which in relation to volume was significantly below average. Our position continues to be that speculators are better off being long Apple Computer than the E mini S&P 500.
Sugar generated in intermediate term sell signal on August 8 and also generated a short-term sell signal on August 10. As we indicated in the August 12 Weekend Wrap up the market too extended on the downside and needs to rally up to the 21.75–22.00 level before it is relatively safe to enter bearish positions. The market is likely to have a countertrend rally at any time and the risk is too great being short at current levels. When the market begins to rally, we will begin to report on sugar again.