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August soybeans lost 38.50 cents and new crop November lost 44 cents on total volume of 232,558. During the past two sessions, volume has been declining. On July 25, volume was 279,165 contracts and soybeans advanced 45.00 cents while open interest declined 8,472 contracts. In other words, volume is diminishing on rallies and declines. As I write this on July 27, August soybeans are trading 30.50 cents higher and it appears that July 27 will be another low volume day. On July 26, open interest declined by 5,411 contracts which brings the four session total to 36,652 contracts, which is healthy for a bull market that is in a corrective phase. The open interest decline of 5,411 relative to volume was average. From July 19 through July 26, open interest has declined by 40,424 contracts while soybeans have declined by 27.75 cents. The market has been a very choppy affair and may continue to trade in this fashion until the August USDA crop report. Stand aside
August soybean meal declined by $11.00 on volume of 88,339 contracts. Open interest declined by 1,935 contracts, which in relation to volume was a tad below average. Since July 19, soybean meal open interest has declined by a total of 19,356 contracts while soybean meal has advanced $4.80. Although the decline of open interest is large in relation to the cumulative advance of $4.80, the market is not declining as speculators liquidate. My issue with declining open interest is with the amount of the decline, rather than the decline itself. I would certainly expect declining open interest when the market is consolidating, however, on July 25, August soybean meal closed up the $20.00 limit, but open interest declined 380 contracts when it should have increased. The market is undergoing volatile choppy trading, which has likely distorted the degree of open interest increases/decreases. Conceivably, the meal market may be setting itself up for a blowoff type advance as we get closer to the expiration of the August contract. Stand aside.
September corn declined by 13.25 cents on very light volume of 240,639 contracts. Volume was lower than on July 6 when 259,607 contracts were traded and corn declined by 13.50 cents while open interest increased by 3,606 contracts. On July 26, open interest declined by 3,742 contracts which is the first time in 18 trading sessions that open interest declined. As mentioned in yesterday’s post, weekly export sales for 2012 and 2013 were negative due to cancellations of orders. This supports that high prices are rationing corn demand, and this is likely to continue with nearby corn trading around $8.00. Stand aside.
September wheat lost 19.25 cents on light volume of 109,102 contracts. Volume was the lowest since July 18 when wheat traded 107,815 contracts and closed 18.25 cents higher while open interest increased by 6,363 contracts. Wheat, like the other grains are consolidating and this is likely to continue with wheat trading in a sideways to lower pattern until the end of the spring wheat harvest. Stand aside.
September crude oil gained 42 cents on very light volume of 378,604 contracts. This was the lightest volume in crude since May 25 when 273,089 contracts were traded and open interest declined by 1,009 contracts while crude oil closed at $91.44. On July 26, open interest increased by 5,796 contracts, which in relation to volume is a below average number. During the past three sessions, open interest has increased by 39,696 contracts while crude oil has advanced $1.23. Although this is a positive set up, the gains had been small and have occurred on low volume. The market remains on a short-term buy signal, which indicates strength in the near term, but remains on in intermediate term sell signal indicating longer-term weakness. Stand aside.
September gasoline advanced 2.08 cents on volume of 131,532 contracts. Open interest declined by 6,149 contracts, which in relation to volume is a very large number. Since July 20 through July 26, open interest has declined by 15,368 contracts while gasoline has declined by 10.44 cents. This is positive open interest action in relation to price. Gasoline remains on a short-term buy signal that was generated on July 16, and is on an intermediate term sell signal that was generated on July 24. In the upcoming Weekend Wrap, we will perform a historical analysis of how gasoline performs from this point through the Labor Day holiday. Stand aside.
September copper gained 1.90 cents on fairly heavy volume of 72,321 contracts. This is the highest volume since July 20 when 80,729 contracts were traded and copper declined by 8.65 cents while open interest declined 3,632 contracts. Open interest on July 26 declined by 537 contracts and on July 25 declined by 1,163 on an advance of 2.15 cents. Open interest action in relation to price continues to act in a bearish fashion. Perhaps with the current risk on environment, a rally to the $3.55-$3.60 area will enable bearish positions to be implemented. Stand aside.
August gold gained 7.00 on heavy volume of 267,109 contracts. Open interest declined by 2,183 which in relation to volume was significantly below average. I attribute the open interest decline to garden variety profit-taking and shorts getting blown out. The market made a new high for the move at 1621.50, which was the highest price for gold since early July. It is highly likely by the end of today’s trading (July 27) that gold will generate its first short-term buy signal in many months. Regardless, I would expect a pullback because the market is clearly overbought. Is important to watch how the market trades during the pullback. For the past two sessions, the dollar has been sharply lower which undoubtedly has aided the move in gold. I encourage readers to check on the Weekend Wrap reports of July 22 in which I stated that gold was a candidate to move higher despite the negative open interest action. I again reiterated this in my reports of July 23 and July 24.
September silver declined by 2 cents on volume of 47,439 contracts. Open interest increased by 1,279 contracts, which in relation to volume was an average number. Silver continues its abysmal performance and there is no reason to be involved with it. Stand aside.
The September Euro gained 1.26 on fairly heavy volume of 338,518 contracts. Volume was the highest since July 5 when 404,368 contracts were traded and the Euro declined by 2.21 cents while open interest increased 17,541 contracts. On July 26, open interest declined by 7,219 contracts, which is typical open interest action for an advance in the Euro. As I write this on July 27, the Euro has made a new high for the move at 1.2397. Stand aside.
S&P 500 E mini:
The S&P 500 E mini gained 20.75 points on fairly heavy volume of 2,277,474 contracts. Volume was the highest since June 29 when 2,491,509 contracts were traded and open interest declined by 21,826 contracts while the S&P 500 E mini advanced 34.00 points. On July 26, open interest declined by 27,935 contracts, which in relation to volume is a below average number, but the fact there was an open interest decline on a rally of this magnitude is negative. The intermediate term S&P 500 cash index and the short term S&P 500 E mini are both on buy signals, yet the signals have conflicted with the open interest action during the past two weeks. As stated in yesterday’s report, there is a pattern of open interest declining on advances or increasing minimally. As mentioned in prior reports, it is the consistency of negative open interest action when the index advances or declines that is of concern. Although volume was healthy on the advance yesterday, speculators were unwilling to make new commitments at higher prices. As I write this on July 27, the S&P 500 E mini is trading 25.50 points higher and has made a new high for the move at 1384.25 on more happy talk from Europe.