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The USDA world agriculture supply and demand estimates will be released on August 10.
September soybeans lost 4.75 cents on light volume of 203,606 contracts. Volume increased by approximately 19,000 contracts from the day before. Open interest declined by 2,788 contracts, which in relation to volume was below average. Open interest in soybeans declined for the seventh day in a row bringing the total decline to 76,054 contracts while soybeans declined by 36.75 cents in this time frame. It is healthy that open interest has been declining and the pullback thus far has been minor. As I write this on August 1, September soybeans are 33.00 cents lower. On August 1, the Federal Reserve makes its announcement of Fed policy based upon its two-day meeting. On Thursday, the European Central Bank will announce its money printing plan. Additionally, on August 3, the monthly employment report will be released. As I pointed out in previous reports, it is the supply and demand for futures contracts that will determine whether the market continues in a corrective phase. We do know that volume has been low for the past five days, which is indicative of a lack of enthusiasm for moves in either direction. It may take the August 10 supply demand report to put soybeans back on the launching pad. Stand aside.
September soybean meal lost $2.30 on volume of 76,866 contracts. Open interest declined by 1,652 contracts, which in relation to volume is slightly below average. During the past seven days, open interest has declined by a total of 22,681 contracts while soybean meal has advanced by $1.00. This is constructive. As I write this on August 1 September soybean meal is down $12.30. Stand aside.
September corn lost 13.50 cents on volume of 253,148 contracts. Open interest declined by 7,942 contracts, which in relation to volume was an above average decline. Like other grains, corn has been in a corrective phase, which has been characterized by low volume and sporadic increases/decreases of open interest. Quite possibly corn will not trade above its all-time high of $8.28 3/4 until at least the August 10 supply and demand report. Probably a good part of the report will have already been discounted by the time of its issuance. If the weekly export sales reports show large cancellations of orders, the enthusiasm for corn at least in the near term may become muted. Although there have been three days when open interest declined, this is a drop in the bucket compared to the massive increase of open interest during the previous 18 consecutive trading days. On the other hand, soybeans and soybean meal have seen heavy declines of open interest and the demand situation in beans is considerably more favorable than corn, which is why I am partial to the soybean and soybean meal trade. As I write this on August 1 September corn is trading 18.25 cents lower. Stand aside.
September wheat lost 26.25 cents on volume of 114,133 contracts. Volume was the highest since July 25 when 131,533 contracts were traded and wheat closed 24.50 cents higher while open interest increased by 787 contracts. Additionally, volume was 32,453 contracts higher than July 30 when wheat closed 16.50 cents higher and open interest increased by 3,519 contracts. Wheat continues in its corrective phase and with some exceptions, open interest has been acting well. As indicated in previous reports, wheat should continue its corrective phase for the next couple of weeks and may be a terrific buy in late August/early September. As I write this on August 1 September wheat is trading 20.50 cents lower. Stand aside.
September crude oil lost $1.72 on heavier volume of 521,322 contracts. Volume was the highest since July 19 when 690,954 contracts were traded and open interest increased by 768 contracts while crude advanced $2.80. The increase in volume on the decline indicates that this may portend further downside action. During the past six trading sessions crude oil has been moving in a sideways pattern. On July 24 September crude oil closed at $88.50 and on July 31 September crude oil closed at $88.06. The market remains on a short-term buy signal and an intermediate term sell signal. Stand aside.
September gasoline closed 4.41 cents lower on very light volume of 105,209 contracts. Volume was the lowest since July 16 when gasoline traded 90,031 contracts and advanced by 3.86 cents while open interest increased 1,176 contracts. Open interest declined by 2,846 contracts, which in relation to volume was an average decline. July 31 was the sixth consecutive day that open interest has declined which brings the total to 24,337 contracts while gasoline has advanced 1.77 cents. The market continues to trade in a bearish fashion and at this juncture there is no reason to be involved in gasoline, especially since the summer driving season is coming to a close. Gasoline remains on a short-term buy signal and an intermediate term sell signal As I write this on August 1, September gasoline is trading 7.15 cents higher Stand aside.
September copper lost 0.25 cents on volume of 62,553 contracts. Open interest increased by 111 contracts. The Chinese economy is slowing and all you have to do is look at the Shanghai Composite Index to see how bad things are in China. As I write this on August 1, copper is trading 4.50 cents lower. The rallies have been short and the open interest action has been terrible on upside moves. It does not appear that a rally to the $3.55 level is possible anytime soon. The only possibility for a substantial rally is if there are bullish announcements from Europe, the Federal Reserve along with a better than average employment report. It appears that there is a fair amount of resistance at the $3.45 level. Stand aside.
December gold lost $9.40 on light volume of 140,510 contracts. Volume was the lightest since July 16 when 118,815 contracts were traded and open interest increased by 2,817 contracts while gold declined by 40 cents. Although it was positive to see that volume contracted on the decline, the open interest action acted negatively for the fourth day in a row. Open interest declined by 9,990 contracts, which in relation to volume is off the charts. During the past four consecutive days, open interest has declined by 21,834 contracts while gold advanced $1.80. This is bearish open interest action relative to price. As I pointed out in yesterday’s report, the negative open interest action indicates that speculators have no confidence in the upside move. The largest increase in open interest occurred on July 25 when gold advanced $31.90 and open interest increased by 4,941 contracts, which is less than average while volume was a healthy 285,117 contracts. In the July 27 report, it was pointed out that on occasion volume will expand dramatically as it did on the 27th (335,400) while the market is making a new high. Often, this signifies a top or temporary top. This turned out to be the case with gold and to make it worse, open interest declined by 5015 contracts. The market remains on a short term buy signal and an intermediate term sell signal.
September silver lost 11.9 cents on volume of 39,875 contracts. Volume increased by 5,053 contracts from July 30 when silver advanced 53.5 cents on volume of 34,822 contracts and open interest increased by 540 contracts. In short, there was greater volume on July 31 when silver closed fractionally lower and had an average true range of 47 cents than on July 30 when the average true range was 69.7 and silver closed significantly higher and above its 50 day moving average for the first time since mid-March. The market is still very skeptical of the upside action in silver. Silver remains on a short and intermediate term sell signal.
The September Euro gained 44 points on volume of 222,060 contracts. Open interest declined by 4,022 contracts. The ECB money printing program will be announced on Thursday. Investors should stand aside.
S&P 500 E mini:
The S&P 500 E mini lost 6.00 points on volume of 1,776,138 contracts. Volume on July 31 increased by nearly 300,000 contracts from July 30. Open interest declined by 7,251 contracts, which in relation to volume is a significantly below average number. July 31 was the fifth day in a row that open interest declined, which brings the total to 103,642 contracts while the S&P 500 E mini advanced by 50.00 points in this time frame. Although it is healthy on July 31 that open interest declined when price declined, the overall pattern during the past several days is that both longs and shorts are liquidating as the market moves higher. This is bearish open interest action relative to price. The S&P 500 E mini remains on a short and intermediate term buy signal, but as stated before, Apple Computer is the preferred play on the long side. It is important to note that China’s Shanghai Composite Index is hitting multi-year lows, which does not bode well for the world’s economy. Chinese economic statistics are notoriously optimistic and unreliable, but the equities market is saying there is major trouble ahead.