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All open positions in the grains should be liquidated by the close of electronic trading on August 9 unless traders have large profits, and/or positions are hedged. The USDA report will be released the morning of August 10.
September soybeans gained 23.25 cents on extremely low volume of 161,874 contracts. Volume declined by approximately 10,000 contracts from August 7 when soybeans declined 16.00 cents and open interest declined by 5,355 contracts. Soybean volume was lower than wheat and traded nearly 8000 fewer contracts. Open interest declined by 9,965 contracts, which is the third day in a row this has occurred and the cumulative three-day decline amounts to 20,112 contracts. Relative to volume, the open interest decline was more than twice the average, which indicates heavy liquidation before the report. As this report is being written on August 9, soybeans are trading 43.50 cents higher.
September soybean meal gained $8.50 on extremely low volume of 57,507 contracts. Volume declined by approximately 11,000 contracts from August 7 when soybean meal declined $5.90 and open interest increased by 31 contracts. On August 8, open interest increased by 2,151 contracts, which in relation to volume is 30% higher than average. Unlike soybeans, where there was significant liquidation, soybean meal experienced well above average commitments of open interest. The difference in the action between soybeans and soybean meal can be attributed to the enormous demand for soybean meal. It has been the star performer on a year-to-date basis. As this report is being written on August 9, soybean meal is trading $15.10 higher.
September corn gained 14.75 cents on surprisingly heavy volume of 332,090 contracts. Volume was the highest since July 24 when 344,674 contracts were traded and open interest increased by 3,660 contracts. Total open interest on August 8 increased by 3,307 contracts, however, open interest in the September contract declined by 20,668 contracts. The increase of open interest is attributable to fairly heavy commitments made in the December forward contracts. As this report is being written on August 9, corn is trading 8.25 cents higher.
September wheat advanced 10.25 cents on volume of 169,716 contracts. Volume was the highest since July 19 when 169,740 contracts were traded and wheat advanced 31.75 cents while open interest increased by 3,286 contracts. On August 8, open interest declined by 2,099 contracts, which in relation to volume was 50% less than average. There was heavy liquidation the September contract and open interest declined by 12,243 contracts. As this report is being written on August 9 wheat is trading 13.50 cents higher.
September crude oil lost 32.00 cents on relatively heavy volume of 615,755 contracts. Volume declined by approximately 36,000 contracts from August 7 when crude oil advanced $1.47 and open interest increased by 17,137 contracts. On August 8, open interest increased by a minuscule 480 contracts, which in relation to volume is essentially an unchanged number. On August 7, the Energy Information Agency released the latest stats for the petroleum markets and stocks of crude oil are over 20 million barrels above year ago levels and over 32 million barrels above the five-year average. In other words, from a supply point of view, there is plenty of crude oil. The rally in crude oil in can be attributed to the anticipation of QE3 and the general “risk on” environment of the past couple of weeks.
September gasoline lost 1.09 cents on volume of 140,521 contracts. Open interest increased by 1,094 contracts. The Energy Information Agency released its stocks report on gasoline and as of the latest report, gasoline stocks are approximately 7 million barrels below year ago levels and near 4.5, million barrels below the five-year average. September gasoline reached a new high for the move at $3.0225 and reversed to close lower. As has been pointed out in previous reports, the summer driving season is coming to a close and although gasoline is on a short and intermediate term buy signal, it is recommended that speculators stand aside.
September heating oil generated a intermediate term buy signal on August 8 and generated a short-term buy signal on August 6. Please see the upcoming Weekend Wrap for more information on heating oil. The latest Energy Information Agency report showed that stocks of distillate fuels were almost 28,000,000 barrels below last year and almost 26,000,000 barrels below the five-year average.
September copper lost 1.90 cents on volume of 60,892 contracts. Volume fell approximately 15,000 contracts from August 7 when copper gained 5.15 cents and open interest declined by 3,787 contracts. Relative to volume, the open interest increase was approximately 50% above average.
December gold closed $3.20 higher on light volume of 92,339 contracts. Open interest increased by 1,790 contracts, and relative to volume the increase was below average. August 8 marked the third day in a row when price and open interest action has been acting in a bullish fashion. For example, when gold moves higher so does open interest and when it declines, open interest declines. Although gold has been trading in a somewhat lackluster manner, it is trading at the higher end of range during the past couple of months. One way to play the gold market in a conservative fashion is to write puts (short puts) for October options at the 1530-1550 level. This offers the speculator protection on the downside because the option is significantly out of the money, but takes advantage of the limited time left in the October option. In the interim, if gold continues to trade in a $30.00-$40.00 range, the option writer makes money, and if the market continues to rally, the writer makes money.
September silver lost 1.1 cent on volume of 49,867 contracts. Volume increased by over 10,000 contracts from August 7 when silver gained 22.3 cents and open interest increased by 133 contracts.
The September Euro lost 57 points on light volume of 186,346 contracts. Volume increased by approximately 13,000 contracts from August 7 when the Euro closed 17 points higher and open interest increased by 2,842 contracts. On August 8, open interest declined by 516 contracts.
S&P 500 E mini:
The S&P 500 E mini gained 1.25 points on very light volume of 1,222,051 contracts. Volume decreased by approximately 240,000 contracts from August 7 when the index closed 7.00 points higher and open interest increased by 14,601 contracts. On August 8 open interest increased by a minuscule 6,276 contracts, which in relation to volume, is approximately 82% less than average. Despite an increase of open interest along with prices during the past two days, the size of the increase is abysmal. When this is added to the continual low volume, a portrait begins to emerge of a market that does not inspire enthusiasm. Looking back over the past couple of weeks of the rally, the S&P E mini is showing open interest that has declined significantly. It has become obvious that speculators are leery of the market at current levels.
On August 8 sugar generated in intermediate term sell signal, and it looks highly likely that sugar will generate a short-term sell signal on August 10. Please see the upcoming Weekend Wrap for more information on sugar.