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All grain positions should be closed out by the end of trading on Thursday, August 9, or fully hedged if speculators are willing to hold positions into the August 10 report.
September soybeans lost 16.00 cents on volume of 171,885 contracts. Volume traded was approximately 11,000 contracts lower than August 6 when soybeans declined 43.25 cents and open interest declined by 4,792 contracts. On August 7, open interest declined by 5,355 contracts which in relation to volume is somewhat above average. The decline of open interest while soybeans traded lower is very positive. This is precisely the kind of action one wants to see in a bull market. As of August 8, September soybeans are trading at $15.98 1/2 and the 50 day moving average on the soybean continuation chart is $15.40 indicating the market is not overbought by much. In the August 5 Weekend Wrap, it was suggested that a short-term trade be considered by entering bullish positions late Monday or early Tuesday in corn soybeans and soybean meal. As indicated in the August 5 Weekend Wrap, any open positions should be closed by Thurday August 9 at 3:00 PM central daylight time. Under no circumstances, should traders be long or short unless these positions are hedged.
September soybean meal lost $5.90 on volume of 68,237 contracts. Volume was almost identical to August 6 when 68,203 contracts were traded and soybean meal declined by $12.30 while open interest increased 1,120 contracts. On August 7, open interest increased by 31 contracts. As of August 8, September soybean meal is trading at $500.20, which is approximately $36.00 above its 50 day moving average of $464.10.
September corn closed 7.00 cents lower on volume of 245,042 contracts. Volume increased by approximately 45,000 contracts from August 6 when corn lost 7.00 cents and open interest increased by 905 contracts. Open interest declined by 3,621 contracts which was the first decline of open interest since August 2 when it declined 846 contracts. As of August 8 corn is trading at $8.09 1/4 and the 50 day moving average for corn on the continuation chart is $6.92 3/8.
September wheat lost 4.25 cents on volume of 115,276 contracts. Volume increased approximately 27,000 contracts from August 6 when wheat closed 2.00 cents higher and open interest increased by 5,867 contracts. On August 7, open interest declined by 7,791 contracts, which in relation to volume is approximately more than a 100% increase over the average. As of August 8, wheat is trading 9.50 cents higher after making a low of $8.69 1/4.
September crude oil gained $1.47 on fairly heavy volume of 651,093 contracts. Volume was the highest since July 19 when 690,954 contracts were traded and crude oil advanced $2.80 while open interest increased by 768 contracts. The high of $93.25 made on July 19 was taken out on August 7 reaching $94.42. Additionally, volume exceeded 628,855 contracts which occurred on August 3 when crude oil advanced $4.27 and open interest increased by 12,779 contracts. On August 7, open interest increased 17,137, which is 35% greater than the increase in open interest on August 3. In other words, participation by the speculative community increased on August 7 and so did their commitments. On the continuation chart, the 50 day moving average for crude oil is $85.86, and the 150 day and 200 day moving averages are 96.45 and 96.62 respectively.
September gasoline advanced 6.91 cents on volume of 135,430 contracts.Volume was the highest since August 2 when 152,209 contracts were traded and gasoline advanced 3.54 cents while open interest declined 169 contracts. Additionally, volume advanced approximately 42,000 contracts from August 6 when gasoline declined 0.88% and open interest increased by 47 contracts. On August 7, open interest increased by 5,351, which in relation to volume is approximately 35% above average. Ostensibly, the explanation for the sharp rise was a refinery explosion in Chevron’s Richmond plant and a number of other plant shutdowns. As pointed out before, the summer driving season is coming to a close and gasoline has a tendency to top out in late August or early September. On August 6, gasoline generated an intermediate term buy signal, which confirmed the short-term buy signal made on July 16. As of August 8, September gasoline is currently trading at $2.9921, which is significantly above its 50 day moving average of $2.72, and above the 150 day moving average of $2.93 and the 200 day moving average of $2.86.
September copper gained 5.15 cents on heavy volume of 75,706 contracts. Volume was the highest since August 2 when 90,793 contracts were traded and copper declined 8.45 cents while open interest increased by 5,704 contracts. Additionally, volume was approximately 32,000 contracts above August 6 when copper advanced 2.15 cents and open interest increased by 719 contracts. On August 3, copper advanced 7.70 cents and volume was 65,378 while open interest declined by 3,342 contracts. Although on August 7, copper gained less than it did on August 3, volume expanded on August 7 by approximately 10,000 contracts. On August 7, open interest declined by 3,787 contracts, which in relation to volume was approximately 70% above average. In other words, there was more participation on the rally of August 7 as evidenced by volume, and the open interest decline was greater on August 7 than on August 3. We are monitoring copper to determine the best spot to implement bearish positions.
December gold lost $3.40 on light volume of 93,594 contracts. Volume increased approximately 7,000 contracts from the day before when gold traded $6.90 higher and open interest increased by 1,391 contracts. For the past two days, open interest has acted respectably, considering its past poor performance. However, this must continue to confirm the validity of the bull market. On July 27, gold generated a short-term buy signal, but as of August 8 has not generated in intermediate term buy signal, which would be confirmation to implement bullish positions. One important consideration is that gold volatility (GVZ) is at the very low end of its six-month trading range, which makes options inexpensive.
September silver gained 22.3 cents on volume of 39,307 contracts. Volume increased by approximately 15,000 contracts from August 6. Open interest increased by 133 contracts, which in relation to volume was a minuscule increase. Gold is clearly the leader, and silver is the follower.
The September Euro closed 17 points higher on light volume of 173,247 contracts. Volume was the lowest since May 1 when 158,472 contracts were traded and the Euro declined by 10 points while open interest declined 2,168 contracts. Additionally, volume declined by approximately 37,000 contracts from August 6 when the Euro gained 18 points and open interest declined by 2,517 contracts. Conceivably, the European Central Bank may be coordinating with the Federal Reserve to make announcements that would crush the dollar and boost the Euro. Stand aside.
S&P 500 E mini:
The September S&P 500 E mini closed 7.00 points higher on light volume of 1,462,314 contracts. Volume increased by 288,069 contracts from August 6 when open interest declined 8,760 and the S&P E mini closed 1.00 point higher. Although, this is the first day the S&P 500 E mini closed higher and open interest increased by 14,601 contracts, in relation to volume, the increase was 65% below average. The market made a new high at 1403.25, but participation as evidenced by the lackluster volume and the bearish-tepid open interest action confirms the lack of enthusiasm for the long side by E mini traders. As mentioned many times in prior reports, it makes more sense to be long Apple Computer than it does the E mini index. Although it appears that the market is headed higher, investors should consider the purchase of protective puts to protect any other long positions. With VIX readings at the low-end of the previous four month range, put protection is inexpensive.